Watchdog flags 69% enforcement gap and urges stronger global action on terror financing
Nearly 70 percent of jurisdictions assessed by the Financial Action Task Force (FATF) show major or structural deficiencies in prosecuting terrorism financing, according to the Comprehensive Update on Terrorist Financing Risks 2025.
The global watchdog warned that these weaknesses expose financial systems to evolving threats and increase compliance challenges for firms.
The report, released a decade after FATF’s last update, calls for “coordinated, multilateral responses” to address cross-border risks and urges stronger implementation of FATF standards across financial institutions, non-financial businesses, and newer sectors such as social media platforms, as reported by White & Case.
Shell companies remain a particular concern.
FATF President Elisa de Anda Madrazo described them as the “getaway car” for criminals, adding that the next round of national assessments will “look heavily into the effectiveness of those systems,” according to Reuters.
She emphasised that information on beneficial owners must be “updated, complete, accurate, and readily available for law enforcement authorities.”
A 2023 Moody’s study of 472 million registered companies worldwide found nearly 20 million with characteristics of shell companies, with the UK recording the most red flags.
FATF has the power to place weak jurisdictions on its “grey list,” which increases monitoring and can damage investor appeal.
Countries on this list include Monaco and the British Virgin Islands, while North Korea, Iran, and Myanmar remain blacklisted, Reuters reported.
Concerns have grown after recent rollbacks in transparency measures.
In March, the US Treasury Department’s financial crimes unit stopped requiring domestic companies to provide beneficial ownership data, though foreign firms must still do so.
Switzerland followed in June, when parliament excluded foundations and associations from its planned transparency register, a move its government had earlier warned could undermine anti-money laundering efforts, Reuters noted.
FATF also underscored the rise of online crime and technology-enabled methods.
De Anda Madrazo said authorities are forced to “play whack-a-mole” as criminals increasingly use cryptocurrencies and other virtual assets to move funds across borders.
The 2025 report highlights the growing overlap between terrorism financing and organised crime, such as drug smuggling, human trafficking, and natural resource exploitation.
It also found that non-profit organisations are being misused, either through diversion of funds or by establishing sham entities, as identified by the Egmont Group.
Newer tactics include blockchain-based crowdfunding, e-money systems, and informal value transfer networks such as hawala, which lack record-keeping and make tracing funds difficult, according to the FATF.
The report also points to a surge in lone actors, often young and radicalised online, who self-finance using microstrategies.
FATF cautioned that “the use of AI by terrorist groups might pose a particular risk in the recruitment and radicalisation of young people.”
The FATF update concludes with 25 terrorism financing risk indicators drawn from global data, designed to help both public agencies and private institutions strengthen monitoring, training, and compliance procedures.
