Money is said to be the oxygen or lifeblood of terrorism. Terrorism financing is a term used for the funds and other property made available for use by the terrorists as well as in relation to the proceeds of terrorist activities.
BNM has defined terrorism financing as financing of terrorism generally refers to carrying out transactions involving funds that may or may not be owned by terrorist, or that have been, or are intended to be used to assist the commission of terrorism.
The major sources of terrorist financing are from both legitimate and illegitimate sources, and the nature of the funding sources may vary according to the type of terrorist groups or organisation. It has been discovered that terrorists also engage in legitimate businesses to fund their violent acts. Though this may be very rare but sometimes trading in books, T-shirts, posters, CD’s and other items, and engaging in normal import and export business such as selling and buying honey or palm oil is one of the major source of funds for these groups. Besides that Terrorist financing through legitimate fund can also simply be in the form of deduction from salary of a sympathizer used to fund terrorist group associates.
This, in a way, means camouflaging their financial flow and providing legitimate revenue for their act. However in some rare cases the source of their money may come from wealthy members of the group. It is alleged that Osama bin Ladin provided funds to the Al-Qaeda group.
However, the illegitimate source of financing would be when terrorists get involved in criminal activities to finance their operations for example, drug trafficking and demand for ransom money from their kidnapped victims, credit card fraud, selling of forged passports, violating intellectual property rights and smuggling of persons illegally into countries. It has been alleged that they sometimes carry out operations of bank robbery to get enough funds needed to carry out a successful operation of terrorist acts. It is most pertinent to state here that as the source of funds for terrorism is illegal, so is the mode of transfer. This is usually not done through banks, but in most cases, through informal value transfer systems. This is done in order to escape being caught by the scrutinising nature of the finance houses and regulatory bodies that are usually in place.
It should be noted however, that no matter how effective the government is in trying to cut and freeze the accounts of these groups, they would always find a new method of obtaining funds. So while the authorities are busy studying that method in order to arrest them they are already using another method making it difficult for them to be caught and providing them with continuous funding for their terrorist activities.

Section 3(1) AMLATFPUAA 2001 defines “terrorism financing offence” as an offence under section 130N,130O,130P or 130Q of the penal code, which are essentially:-
a) Providing or collecting property for terrorist acts.
b) Providing services for terrorism purpose.
c) Arranging for retention or control of terrorist property.
d) Dealing with terrorist property.
Terrorists seem to choose methods of moving funds that take into account issues such as volume, risk, convenience, simplicity, costs, and speed.
Below are the methods that terrorists will use to transfer the money to support their activity:-
Cash Couriers
Using couriers to move physical cash is the “simplest and oldest way of moving value.” When criminals move cash across international borders, they typically conceal it in vehicles, packages, luggage, or anything else that can hold large physical volumes of cash. According to the 9/11 Commission Monograph, al-Qaeda used money changers to transfer US $1 million from the UAE to Pakistan and then used couriers to transfer the funds as cash into Afghanistan.
Informal Transfer Systems
There are several types of informal financial networks, such as Hawala/Hundi in South Asia, Fei ch’ien in China, Phoe Khan in Thailand, and Door-to-Door in the Philippines. Lashkar-e-Toiba used hawala networks to move funds before their 2000 Red Fort attack in Delhi.
Money Service Businesses
Money service businesses are generally subject to the same regulations and laws as banks, and are subject to regulatory audits. However, unlike banks, MSBs do not follow similarly rigorous “know your customer” (KYC) procedures.
Formal Banking
The formal banking sector includes depository financial institutions (DFIs) – banks, saving and loans, and credit unions – which are the sole entities permitted “to engage in the business of receiving deposits and providing access to those deposits” through a payment system of checks, electronic networks, credit and debit cards, and bank-to-bank transfers.
False Trade Invoicing
False trade invoicing disguises the transmission of value from one jurisdiction to another. This can be done through over-invoicing or under-invoicing.
High-value commodities
Valuable commodities like gold and diamonds offer yet another convenient method for transmitting value across borders.

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Money is said to be the oxygen or lifeblood of terrorism. Terrorism financing is a term used for the funds and other property made available for use by the terrorists as well as in relation to the proceeds of terrorist activities.
BNM has defined terrorism financing as financing of terrorism generally refers to carrying out transactions involving funds that may or may not be owned by terrorist, or that have been, or are intended to be used to assist the commission of terrorism.
The major sources of terrorist financing are from both legitimate and illegitimate sources, and the nature of the funding sources may vary according to the type of terrorist groups or organisation. It has been discovered that terrorists also engage in legitimate businesses to fund their violent acts. Though this may be very rare but sometimes trading in books, T-shirts, posters, CD’s and other items, and engaging in normal import and export business such as selling and buying honey or palm oil is one of the major source of funds for these groups. Besides that Terrorist financing through legitimate fund can also simply be in the form of deduction from salary of a sympathizer used to fund terrorist group associates.
This, in a way, means camouflaging their financial flow and providing legitimate revenue for their act. However in some rare cases the source of their money may come from wealthy members of the group. It is alleged that Osama bin Ladin provided funds to the Al-Qaeda group.
However, the illegitimate source of financing would be when terrorists get involved in criminal activities to finance their operations for example, drug trafficking and demand for ransom money from their kidnapped victims, credit card fraud, selling of forged passports, violating intellectual property rights and smuggling of persons illegally into countries. It has been alleged that they sometimes carry out operations of bank robbery to get enough funds needed to carry out a successful operation of terrorist acts. It is most pertinent to state here that as the source of funds for terrorism is illegal, so is the mode of transfer. This is usually not done through banks, but in most cases, through informal value transfer systems. This is done in order to escape being caught by the scrutinising nature of the finance houses and regulatory bodies that are usually in place.
It should be noted however, that no matter how effective the government is in trying to cut and freeze the accounts of these groups, they would always find a new method of obtaining funds. So while the authorities are busy studying that method in order to arrest them they are already using another method making it difficult for them to be caught and providing them with continuous funding for their terrorist activities.

Section 3(1) AMLATFPUAA 2001 defines “terrorism financing offence” as an offence under section 130N,130O,130P or 130Q of the penal code, which are essentially:-
a) Providing or collecting property for terrorist acts.
b) Providing services for terrorism purpose.
c) Arranging for retention or control of terrorist property.
d) Dealing with terrorist property.
Terrorists seem to choose methods of moving funds that take into account issues such as volume, risk, convenience, simplicity, costs, and speed.
Below are the methods that terrorists will use to transfer the money to support their activity:-
Cash Couriers
Using couriers to move physical cash is the “simplest and oldest way of moving value.” When criminals move cash across international borders, they typically conceal it in vehicles, packages, luggage, or anything else that can hold large physical volumes of cash. According to the 9/11 Commission Monograph, al-Qaeda used money changers to transfer US $1 million from the UAE to Pakistan and then used couriers to transfer the funds as cash into Afghanistan.
Informal Transfer Systems
There are several types of informal financial networks, such as Hawala/Hundi in South Asia, Fei ch’ien in China, Phoe Khan in Thailand, and Door-to-Door in the Philippines. Lashkar-e-Toiba used hawala networks to move funds before their 2000 Red Fort attack in Delhi.
Money Service Businesses
Money service businesses are generally subject to the same regulations and laws as banks, and are subject to regulatory audits. However, unlike banks, MSBs do not follow similarly rigorous “know your customer” (KYC) procedures.
Formal Banking
The formal banking sector includes depository financial institutions (DFIs) – banks, saving and loans, and credit unions – which are the sole entities permitted “to engage in the business of receiving deposits and providing access to those deposits” through a payment system of checks, electronic networks, credit and debit cards, and bank-to-bank transfers.
False Trade Invoicing
False trade invoicing disguises the transmission of value from one jurisdiction to another. This can be done through over-invoicing or under-invoicing.
High-value commodities
Valuable commodities like gold and diamonds offer yet another convenient method for transmitting value across borders.

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