 "How terrorists use e-commerce, online payments to fund terror activities")
Are terrorists using e-commerce sites to buy explosives and fund activities?
That’s what the Financial Action Task Force (FATF) is warning.
The global watchdog for money laundering and terror financing in a report has cited at least two examples from India.
But what happened? What do we know?
Let’s take a closer look:
What do we know?
The FATF report is entitled the Comprehensive Update on Terrorist Financing Risks.
The FATF in June had said it would conduct a detailed investigation of terror financing. It made the announcement in the aftermath of the Pahalgam terror attack.
The report was based on studies from jurisdictions around the world.
It was made with the help of the United Nations Counter-Terrorism Executive Directorate (UN CTED) and co-led by France.
It uses data from over 80 jurisdictions including 840 submissions from the private sector, academia, and think-tanks.
It said that terrorists are using online platforms such as Amazon and PayPal to raise and move funds for their nefarious activities.
The report cited two cases from India – the Gorakhnath temple attack in 2022 and the Pulwama attack in 2019 as examples.
It said that in the 2022 Goraknath incident in which an individual influenced by Islamic State in Iraq and the Levant (ISIL) ideology attacked security, the accused used PayPal and VPNS to transfer Rs 6.69 lakh abroad.
He made at least 44 international third party transactions.
The accused also received Rs 10,323 from abroad.
“Due to the suspicious nature of these transactions and the potential for TF, PayPal suspended the accused’s account, thereby preventing further illicit fund transfers,” the FATF noted, citing a case study provided by India’s Ministry of Finance.
“As the offer of online payment services from Fintech companies grew substantially over the last 10 years, cases of terrorists opting for those services can be observed across all contexts, especially as it offers an opportunity to diversify fund-moving channels. These payment services also appear attractive for terrorist organisations for the low-cost and fast money transfer solutions they offer, with the possibility for enhanced opacity on initiators and beneficiaries through pseudonyms or fake accounts”, the report added.
In the Pulwama attack carried out by the by Jaish-e-Mohammed (JeM), the report said that aluminium powder, a component critical to the attack, was purchased via electronic point-of-sale marketplaces (EPOM) Amazon – an ad network.
The powder was used to make the blast, in which 40 soldiers were killed, more powerful.
‘Terrorists use EPOMs for money laundering’
The report also noted the growing abuse of such platforms by terrorists.
It said terrorists were buying equipment, weapons, chemicals, and 3D printing materials from such online platforms.
“Terrorists have used these platforms to sell items to finance their projects and operations, including lower-value items that were previously not in demand,” the report stated.
It noted how terrorists can use EPOMs for money laundering.
“They can be used for fund-moving purposes inspired by trade-based money laundering schemes. Traded goods can indeed offer disguise to value being transferred from an accomplice to another member of the network. In such a scheme, the first actor would purchase items, send them to his accomplice through a platform, for the latter to sell in another jurisdiction and use the profits to finance terrorism.”
The report said that when it comes to money laundering for terrorist activities, online payment services offer more secrecy than wire transfers.
This makes finding participants harder.
The NIA during its probe found that Waiz-ul-Islam, one of the accused, used his Amazon account to buy chemicals to manufacture IEDs, batteries and other accessories on the directions of JeM terrorists.
Waiz then personally delivered the goods to the terrorists as part of the conspiracy to carry out the Pulwama attack, the NIA had said.
The NIA has also flagged the use of Chinese apps, crypto wallets, satellite phones and the Darknet in multiple investigations.
This includes the Rameswaram Café blast (2024), Pulwama attack (2019), Laos cyber slavery case, Bihar-Nepal FICN seizures and the ISIS radicalisation probe (2020).
What else did the report say?
The FATF also for the first time defined State-sponsored terrorism.
It stated that this label would be applied to any nation actively funding terror activities as part of its official policy’.
“Certain terrorist organisations have been and continue to receive financial and other forms of support from several national governments,” the FATF said without naming any country.
“Several forms of support have been reported, including direct financial support, logistical and material support, or the provision of training. Delegations reported state sponsorship for TF purposes coupled with sanctions circumvention techniques through trade and smuggling mechanisms where the national government potentially plays a supportive role,” it added.
It singled out Pakistan-based terror groups LeT, JeM, and Tehrik-e-Taliban Pakistan (TTP) remain a global threat.
Experts think this could add weight to India’s case why Pakistan should be added to on the FATF ‘Grey list’.
India’s Department of Revenue has sent the FATF three letters thus far making this case.
India in its in its ML/TF risk assessment 2022 had also identified state-sponsored terrorism from Pakistan as a source of terrorist financing risk.
The report said Pakistan-linked terror groups use informal cash systems such as hawala, charities and digital platforms to transfer funds across borders.
They use social media, crypto, and front NGOs to avoid detection.
The FATF added that the LeT and JeM use shell companies and non-profits to gather funds.
The FATF also said these groups raise funds by exploiting natural resources, extortion, and arms smuggling.
It also noted that terror groups were using crypto more and more to carry out secret transactions.
Interestingly, Pakistan has formed its own Cryptocurrency Council and even launched a venture with ties to the family of US President Donald Trump.
India has consistently labelled Pakistan a supporter of terrorism and argued that Islamabad should be added to the ‘Grey list’ – which is officially known as “Jurisdictions Under Increased Monitoring”.
The FATF places a country on the ‘Grey List’ as a final warning to get it to comply with its directives.
If a country still refuses to comply, it will be blacklisted by the organisation or be put on the ‘Black List’.
69 per cent of countries fall short in terror financing cases
The FATF report also found that 69 per cent of countries fall short when it comes to investigating and prosecuting terror financing cases.
This despite technological leaps in surveillance and financial regulation.
The report called for technical compliance to be enhanced, more intelligence-sharing between nations and re-examining regulatory frameworks.
It also said that lone-wolf attacks were on the rise and that these attacks, usually by young individuals, were funded by legal sources, small crimes, online gaming, social media and crowd funding.
The FATF warned that his makes it harder to track such individuals.
It also warned that terrorists were hijacking humanitarian aid in conflict zones and using them for their own nefarious purposes.
The FATF asked governments and international NGOs to take measures to counter the same.
It set out a number of risk indicators including unusual payment activity, irregular travel patterns, and suspicious digital behaviour to help detect such risks earlier.
With inputs from agencies
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