Possible UPSC Questions
- Discuss the new techniques of terrorist financing highlighted in FATF’s 2025 report and the policy challenges they pose for India.
- How have digital platforms altered the landscape of terror funding? Illustrate with recent Indian case studies quoted by FATF.
- Examine the role of state sponsorship in contemporary terrorist financing as per the latest FATF findings.
- ‘Decentralisation of terror outfits is reshaping global counter-terrorism strategy.’ Critically analyse in light of Al-Qaeda’s organisational changes.
Quick Outline of Key Facts
Key Point | Details (FATF 2025 report) |
Platform abuse | Rising misuse of social media, messaging apps, crowdfunding, e-commerce, VPNs, online payment gateways |
Indian case studies | Pulwama (2019) & Gorakhnath Temple attack (2022) financed via PayPal, VPN-shielded transfers; ₹6.7 lakh sent abroad, ₹10,000+ received |
State sponsorship | Delegations reported continued financial & logistical backing of certain terror groups by “several national governments” (countries not named) |
Commodity-swap schemes | Example: crude oil → intermediate country → gold → cash in third jurisdiction |
Decentralised cells | Al-Qaeda & affiliates now rely on regional hubs (e.g., AQIS) and self-financed micro-cells; diversified sources: crime proceeds, local investments |
FATF warning (June 2025) | Linked Pahalgam attack (Apr-22) to illicit cross-border transfers; reaffirmed “no terrorism without money” doctrine |
Summary
The Financial Action Task Force (FATF) released a thematic report (July 2025) mapping the newest contours of terrorist financing (TF). It underscores a marked shift from bulk cash and formal banking channels to highly adaptable, technology-driven methods that are harder to trace and disrupt.
Digital ecosystems as enablers
Terror outfits and lone actors are exploiting the ubiquity of smartphones, virtual private networks (VPNs), e-commerce sites and global payment service providers. FATF cites two Indian incidents to demonstrate this trend. In the 2019 Pulwama attack, planners used online gateways and crowd-funding appeals to move resources. In the April 2022 Gorakhnath Temple stabbing, the assailant—steeped in Islamic State propaganda—remitted ₹6.69 lakh abroad through PayPal, masked his IP via paid VPN services, and even received micro-donations from foreign sympathisers. Such cases show that modest sums, routed digitally and piecemeal, can seed high-impact violence.
State involvement and commodity swaps
Without naming countries, the report records multiple delegations’ evidence of continued state sponsorship—either direct funding or facilitation—as a TF “fund-raising technique” or “financial management strategy”. It further highlights complex trade-based laundering: oil shipped to an intermediary nation, sold for gold, the bullion then liquidated elsewhere for cash. These multi-jurisdictional chains defeat conventional banking surveillance.
Organisational decentralisation
Another key finding is the fragmentation of once-centralised groups. Al-Qaeda, formerly guided by a consultative Majlis al-Shura that oversaw global finances, now empowers regional arms (e.g., Al-Qaeda in the Indian Subcontinent) to raise and spend money locally. Such “self-financed cells”, often blending licit business with illicit proceeds, reduce detectability and resilience to sanctions.
FATF’s strategic concern
Echoing its June 2025 condemnation of the Pahalgam massacre, FATF reiterates that terror attacks “cannot occur without money and the means to transfer funds”. It stresses member states must update typologies, enhance inter-agency coordination, regulate online payment intermediaries, and scrutinise commodity trade routes. The body plans deeper analysis of state-linked TF and urges jurisdictions to criminalise sponsorship comprehensively.
Significance to the UPSC Exam
- GS-III (Internal Security) – Offers concrete examples of evolving terror-funding tactics relevant for answers on cyber-security, money laundering and FATF compliance.
- GS-II (International Organisations) – Illustrates FATF’s role in global governance and India’s stakes in grey-list/black-list dynamics.
- Essay/Ethics – Raises issues of state responsibility, digital privacy vs. security, and the ethics of financial surveillance.
Mastery of these insights enables aspirants to craft nuanced, contemporary responses linking policy, technology and security.