The Financial Action Task Force (FATF) has issued a series of significant updates in 2025, reinforcing its three core pillars: combatting money laundering, terrorist financing, and proliferation financing. Two key publications, the Comprehensive Update on Terrorist Financing Risks 2025 and the Guidance on Countering Proliferation Financing, highlight the evolving nature of these threats and the urgent need for globally coordinated, risk-based responses. These updates address specific emerging challenges such as virtual assets, crowdfunding and sanctions evasion, which we will explore.
Evolving Risk 1: Terrorist Financing
The Comprehensive Update on Terrorist Financing Risks 2025, stressed the continued adaptability of terrorist actors in exploiting the global financial system. Developed in collaboration with the United Nations Counter-Terrorism Committee Executive Directorate and contributions from over 80 jurisdictions, the report outlines a wide range of terrorist financing typologies shaped by regional and contextual factors.
Terrorist groups continue to exploit both traditional and modern financial channels including cash, bank accounts, virtual assets and crowdfunding platforms, to finance their operations. Key findings include the growing misuse of virtual assets and cryptocurrencies, which offer anonymity and cross-border functionality, making them attractive for illicit financing. Importantly, terrorist financing does not always involve proceeds of crime, distinguishing it from money laundering. It is critical to note that terrorist financing does not always involve the proceeds of crime, which distinguishes it from money laundering.
FATF has also identified the growing exploitation of crowdfunding platforms, particularly through social media, to solicit global donations as well as the use of non-profit organisations and informal value transfer systems such as hawala, often due to weaker regulatory oversight.
FATF President Elisa de Anda Madrazo spoke to the urgency of addressing these vulnerabilities, stating, “This continued abuse of the financial system poses a serious threat to global security and undermines international peace.” The report calls for enhanced intelligence sharing, stronger public-private partnerships, and the implementation of risk-based Counter-Terrorist Financing (CTF) measures.
UK Implications
For firms in the UK, including those regulated by the Financial Conduct Authority (FCA), the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs), provide the framework for implementing controls to counter terrorist financing. These include enhanced customer due diligence measures in situations where there is a higher risk of terrorist financing, including CTF considerations into the firm-wide risk assessment and appointing a senior personnel with appropriate authority and expertise to oversee these controls.
Evolving risk 2: Proliferation Financing
The Guidance on Countering Proliferation Financing addresses the financing of weapons of mass destruction proliferation, a critical and growing threat. UK regulators, including the FCA and HM Revenue and Customs (HMRC), have amplified their scrutiny of firms’ controls in this area throughout the year.
The report reveals that only 16% of assessed countries demonstrated high or substantial effectiveness in implementing targeted financial sanctions under United Nations Security Council Resolutions, particularly in relation to FATF Recommendation 7, which is to ensure targeted financial sanctions related to proliferation financing.
Illicit actors are employing increasingly sophisticated methods to evade sanctions, including cyberattacks on virtual asset platforms, generating billions in illicit revenue and the use of front companies, shell companies and complex ownership structures to obscure financial trails.
To counter these threats, FATF emphasises the importance of public-private collaboration and intelligence sharing, issuing detailed alerts to support Suspicious Activity Reporting (SARs), and conducting national risk assessments specific to proliferation financing, an approach already being adopted by UK authorities.
UK Implications
Firms must ensure compliance with the Sanctions and Anti-Money Laundering Act 2018 and relevant FCA requirements under SYSC 6.3, as well as adhere to sanctions-related obligations administered by HM Treasury’s Office of Financial Sanctions Implementation (OFSI).
FATF’s Recommendations
Both FATF reports highlight systematic global deficiencies. Many jurisdictions struggle to fully understanding terrorist financing trends, which undermines the effectiveness of their countermeasures. The terrorist financing report draws on over 840 submissions from the private sector, academia, and think tanks, offering a nuanced view of evolving risks.
Similarly, the proliferation financing guidance identifies enforcement challenges, including inadequate regulatory frameworks, limited cross-border cooperation, and insufficient technical capacity.
To address these gaps, FATF recommends:
- Strengthening technical compliance and effectiveness, particularly in high-risk jurisdictions such as Iran, Myanmar, and North Korea, which remain on FATF’s blacklist.
- Updating guidance on financial inclusion to ensure legitimate entities, such as non-profits are not unduly restricted, while also maintaining appropriate financial crime controls.
FATF’s updates for 2025 provide a clear and urgent roadmap for strengthening global responses to terrorist and proliferation financing. By highlighting the adaptability of illicit actors and the systemic vulnerabilities that persist, the reports call for coordinated, risk-based action. Jurisdictions must leverage FATF’s framework, enhance intelligence sharing, and promote public-private partnerships to play their part in preserving the integrity of the international financial system.
How Complyport Can Help
While FATF sets the global standard, we are already seeing practical implications within the UK regulatory environment. Both the FCA and HMRC have intensified their supervisory focus, with terrorist and proliferation financing emerging as common areas of weakness across many regulated firms.
Complyport’s team of regulatory experts can assist you in:
- Conducting risk assessments specific to terrorist and proliferation financing
- Reviewing and enhancing your firm’s AML/CTF/PF framework
- Ensuring compliance with UK MLRs, FCA requirements, and OFSI guidance
- Preparing for FCA and HMRC thematic reviews and inspections
Book a meeting with a Complyport Subject Matter Expert to discuss how these developments may impact your firm and receive tailored guidance on enhancing your financial crime risk framework.
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