Combating the Financing of Terrorism (CFT)¶
Definition¶
CFT (Combating the Financing of Terrorism) refers to the set of laws, regulations, and measures designed to identify, prevent, and disrupt the flow of funds to terrorist organizations and activities. CFT and AML are closely linked — they share the same regulatory frameworks and are often referred to together as AML/CFT.
How Terrorism Financing Differs from Money Laundering¶
| Aspect | Money Laundering | Terrorism Financing |
|---|---|---|
| Source of funds | Illegal (proceeds of crime) | Can be legal OR illegal |
| Amount | Often large | Often small amounts |
| Purpose | Disguise criminal proceeds | Fund terrorist acts |
| Direction | Dirty → clean (legitimize) | Clean/dirty → attack funding |
| Detection | Follow the money trail | Follow the purpose/recipient |
Critical Difference
Terrorism financing is especially hard to detect because the funds can be entirely legitimate (donations, salaries, business income) — it's the intended use that makes it criminal. Small, seemingly normal transactions can fund devastating attacks.
CFT in the eKYC Context¶
| eKYC Component | CFT Application |
|---|---|
| Sanctions screening | Check all customers against OFAC, UN, EU terrorism lists |
| PEP screening | Identify individuals connected to state-sponsored terrorism |
| Geographic risk | Flag customers from countries with known terrorism financing risks |
| Transaction monitoring | Detect small, frequent transfers to high-risk regions |
| Adverse media | Flag customers with terrorism-related news |
| Name screening | Fuzzy matching against terrorism watchlists |
Key International CFT Instruments¶
| Instrument | What It Covers |
|---|---|
| FATF Recommendation 5 | Criminalization of terrorist financing |
| FATF Recommendation 6 | Targeted financial sanctions for terrorism |
| UN Security Council Resolutions | 1267 (Al-Qaeda/Taliban), 1373 (all terrorism), 2462 (CFT) |
| US Executive Orders | 13224 (blocking terrorist property) |
| EU Directive 2017/541 | EU terrorism financing directive |
Key Takeaways¶
Summary
- CFT is closely linked to AML — same frameworks, same eKYC tools, but different detection challenges
- Terrorism financing can use legitimate funds — making detection harder than money laundering
- Sanctions screening is the primary CFT tool in eKYC — checking against UN, OFAC, EU terrorism lists
- Small amounts matter — $10K can fund a terrorist attack, so transaction monitoring thresholds must be low
- eKYC providers must support real-time, comprehensive sanctions screening as a core capability