What is terrorist financing?

Terrorist financing isn’t just a distant threat—it’s a real and evolving challenge that UK professionals in the property, legal, and accountancy fields must be prepared to confront. It involves the misuse of financial resources to support terrorist activities, ranging from operational expenses to propaganda efforts.

Unlike money laundering, which often “cleans” illegal proceeds, terrorist financing can start with legitimate money that’s subsequently redirected toward illegal activities.

When and how terrorist financing occurs

Terrorist financiers are adept at exploiting gaps in the financial system. As professionals in key industries, your role in identifying and addressing these risks is pivotal.

Terrorist financing can occur during various stages of a transaction. The methods employed can range from rudimentary to highly sophisticated, depending on the scale of operations. These methods might include:

• Charitable donations: Some terrorist organisations establish fake charities or misuse legitimate ones to collect donations. These donations might appear legitimate on the surface but are ultimately redirected toward funding terrorist activities.
• Legitimate sources: Legitimate earnings such as salaries, business profits or personal savings can be diverted to fund terrorism. These funds might be disguised through complex transactions or simply transferred via online payment systems.
• Crowdfunding platforms and cryptocurrencies: The rise of online fundraising and cryptocurrencies has introduced new avenues for terrorist financing. Crowdfunding platforms can be misused to collect small amounts from multiple donors under false pretences, while cryptocurrencies provide anonymity for transferring funds.
• Criminal activities: Illicit trade, smuggling and fraud are frequently used to generate revenue for terrorist activities. These crimes could involve the sale of counterfeit goods, drug or human trafficking or financial scams.
• Exploitation of economic institutions: Terrorists can exploit weaknesses in banking and financial systems to transfer or launder money. This may include the use of offshore accounts, anonymous transactions, or shell companies to obscure the money trail.

By staying alert to these diverse methods, you not only protect your reputation but also contribute to a safer UK financial ecosystem. Understanding these mechanisms is critical to identifying red flags and preventing unwitting involvement in such activities.

Real-life examples of terrorist financing

Terrorist financing (TF) continues to evolve, with recent cases highlighting the diverse methods employed by terrorist organisations to fund their activities. Understanding these cases is crucial for regulated professionals in the property, legal, and accountancy sectors to identify and mitigate potential risks.

1. Asset freeze of Armagh man linked to the New IRA (2024)

In November 2024, the UK government imposed sanctions on Brian Sheridan, a 48-year-old from Armagh, for alleged involvement in terrorist activities associated with the New IRA.

This action marked the first domestic counter-terrorism sanction by the UK Treasury concerning terrorism in Northern Ireland. The comprehensive asset freeze prevents any funds or economic resources in the UK related to Sheridan from being accessed or controlled. He is suspected of facilitating terrorism and providing financial services or resources for terrorist activities.

2. Standard Chartered’s alleged processing of payments for terror groups (2023)

In May 2023, whistleblowers alleged that British bank Standard Chartered facilitated over $100 billion in transactions for sanctioned entities, including terrorist organisations like Hamas and Al-Qaeda, between 2008 and 2013. The bank was accused of processing payments for entities linked to terrorism, despite previous fines for similar violations.

How you can become unwittingly involved

Terrorist financing often exploits professionals, such as those in the property, legal and accountancy sectors, to mask the destination of funds or legitimise illicit funds. Here’s how:

1. Property transactions
   Property purchases are a popular method for storing and transferring wealth. For instance, funds from illicit sources can be used to buy high-value properties, which are later sold to integrate the money into the financial system. Professionals involved in these transactions may unknowingly facilitate the process if due diligence is inadequate.
2. Legal and TCSP services
   Lawyers can be exploited to create complex corporate structures, such as shell companies or trusts, that conceal the ultimate beneficial owner (UBO). These structures can be used to channel funds to or from terrorist organisations without raising immediate suspicion.
3. Accountancy services
   Accountants play a crucial role in managing finances. A lack of scrutiny may allow funds linked to terrorism to pass through seemingly legitimate financial reports, tax filings or audit procedures.

Counter terror-financing measures in the UK regulations

As a regulated professional, you’re on the front line when it comes to spotting and stopping terrorist financing (TF). The UK’s rules on counter terror financing (CTF) are built around the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017). These align with global standards set by the Financial Action Task Force (FATF). Here’s what you need to know and do to stay compliant and protect your profession.

1. Take a risk-based approach

Under Regulation 18 of MLR 2017, you need to assess the potential risks of money laundering and terrorist financing within your business. It’s all about focusing your resources on the areas most at risk.

Think about the potential risks tied to your clients, transactions, products, and services. For example, your clients from high-risk countries, politically exposed persons (PEPs), or non-face-to-face interactions will need extra attention.

Questions like these will help you build a clearer picture of the risks your client base might pose.

Are any of your your clients operating in high-risk jurisdictions?
Do transactions involve unusually high amounts or complex structures?
Are there discrepancies in the information provided by your clients?

Write down your findings and update them regularly. If your business changes or new potential risks emerge, make sure your assessments reflect that.

2. Customer due diligence (CDD)

Regulations 27–30 make CDD essential. This is where you verify your client’s identity and get a good understanding of why they’re doing business with you. For higher-risk cases—like your clients linked to high-value cash transactions or high-risk jurisdictions—you’ll need to go a step further with Enhanced Due Diligence (EDD).

Under Regulation 33, you also need to know you’re not dealing with anyone on the UK’s sanctions list. This is managed by the Office of Financial Sanctions Implementation (OFSI). You can use up-to-date sanctions screening systems to check your clients and transactions.

CDD isn’t a “set it and forget it” process. Keep an eye on your your clients and their transactions over time to spot anything unusual.

3. Report suspicious activity (SAR)

If you see something that doesn’t add up, you have a legal duty to report it. Under the Proceeds of Crime Act 2002 (POCA) and the Terrorism Act 2000, you need to file a Suspicious Activity Report (SAR) with the National Crime Agency (NCA) if you suspect money or assets are linked to terrorism.

Again, technology can enhance your ability to detect suspicious activity. Automated monitoring systems can flag large, unexpected transactions, transfers to or from high-risk countries, and unusual payment patterns, such as frequent small transfers
Any SAR you do file should detail the suspicious activity, who’s involved and any evidence you have—like transaction records. Professional bodies like the Law Society and the ICAEW offer guidance on how to write effective SARs.

5. Keep your your records in order

Good record-keeping isn’t just helpful—it’s required. Regulation 40 says you should keep detailed your records of all transactions, risk assessments, and due diligence for at least five years.

Everything from CDD your records to risk assessments should be stored securely and be easily accessible. If law enforcement asks for them, you need to provide them quickly. Ensure that all your records related to due diligence, client interactions, and risk assessments are stored securely for at least five years from the end of your relationship with the client.

6. Train your your team

Regulation 24 makes it clear that you need to train your staff regularly. Everyone on your your team should know how to spot red flags and what to do if they find something suspicious.

Teach your your team about identifying TF potential risks, filing SARs, and handling client onboarding. Refresh the training at least once a year or whenever new potential risks or rules come into play.

Compliance is a collective responsibility. Foster a culture where employees understand the importance of AML and CTF efforts. Encourage open communication and provide a safe environment for reporting concerns.

7. Engage with regulatory bodies and industry peers

Collaboration enhances your ability to detect and mitigate potential risks. Engage with regulators, law enforcement, and peers to build a unified approach to combating terrorist financing. This network can also help you stay updated on emerging threats.

By following these measures, you’re not just staying compliant—you’re actively protecting your business, your your clients, and society from the potential risks of terrorist financing. It’s about vigilance, action and making sure your work helps build a safer financial system for everyone.

Final thoughts

Understanding and addressing the potential risks of terrorist financing is crucial for regulated professionals. By implementing robust AML and CTF measures, staying informed about emerging threats, and fostering a culture of your compliance efforts, you can play a pivotal role in protecting the integrity of the UK’s financial system. Ultimately, your vigilance and proactive measures contribute to a safer and more secure society.