FATF Flags Threat of Money Misuse in Rapidly Digitalising World

Moneylife Digital Team 16 July 2025

Consumer Interest

Global terror financing watchdog, Financial Action Task Force (FATF) has underlined the potential threats where money can be misused in a rapidly digitalising world. FATF says money can be misused to support terrorism, hide illegal earnings, or fund activities that can harm global peace. It highlighted that to protect the world’s financial systems, FATF works with countries around the globe

FATF underlined its two reports published this year which extensively cover advanced methods including the manipulation of beneficial ownership information to mask the identities of sanctioned individuals and entities, the misuse of virtual assets and cryptocurrencies and leveraging maritime sectors and shipping industries to bypass international regulations.

A report titled ‘Comprehensive Update on Terrorist Financing Risks’, provides in-depth insights into terrorist financing methods and emerging risks, including the increasing involvement of state-sponsored terrorism.

A case study contributed by India highlights the proliferation concerns for the South Asian region arising from the State-owned National Development Complex in Pakistan, which is sanctioned in multiple jurisdictions for proliferation financing concerns. It says Pakistan remains a high-risk jurisdiction in the region for proliferation financing.

India, in its National Risk Assessment for Money Laundering and Terrorist Financing Report 2022, has identified Pakistan’s State sponsorship of terrorism as a high-risk terror financing source.

With 40 member nations and over 200 jurisdictions committed to its framework, FATF regularly identifies countries with weak controls, placing them either on the 'Grey List' for strategic deficiencies under monitoring or the 'Blacklist' for serious lapses that require immediate countermeasures. As of June 2025, 26 countries, including South Africa and Nepal, are under increased monitoring, while North Korea, Iran and Myanmar remain blacklisted.

India, which became the 34th FATF member in 2010, continues to enhance its financial safeguards. Two key FATF reports released in June and July 2025 highlight emerging threats such as the use of virtual assets, e-commerce platforms, and even gaming applications to finance terrorism and evade sanctions.

One report details how entities manipulate beneficial ownership and exploit cryptocurrency to hide proliferation financing networks, with India contributing a case study highlighting Pakistan’s involvement in regional proliferation risks.

The second report on terrorist financing reveals the growing complexity of terror funding, blending traditional methods like hawala with modern tools like crowdfunding and mobile money. It also flags the rising role of state sponsors including Pakistan, and the microfinancing of lone-wolf actors using VPNs and online payment services, with India again contributing field data.

FATF acknowledges India as among the few nations demonstrating substantial effectiveness in combating proliferation financing and urges stronger international cooperation and regulation of digital finance and social media to stay ahead of these evolving threats.

Comments

User

parimalshah1

5 months ago

The US is in a financial situation worse than that of Sri Lanka and Pakistan. US only survives by printing more dollars without any baking of gold, and hence trying to create crypto coins without any underlying security. In fact It supports terror groups across the world. It is the biggest terror sponsor in the world and tries to fund now by making crypto official.