What is Terrorism Financing (TF)?

Terrorism financing is the act of providing financial support to terrorists or terrorist organisations to enable them to carry out terrorist acts or to benefit any terrorist or terrorist organisation.

While funds may come from criminal activities, they may also be derived from legitimate sources, for example, through salaries, revenue from legitimate business or donations including through non-profit organisations.

Similar to money laundering, there are generally three stages in terrorism financing: raising, moving and using funds. Despite the different stages, the ways in which terrorism financing is done is similar and, in some cases, may be identical to the methods used to launder money. In both cases, the perpetrator seeks to misuse the financial or non-financial sectors for illegitimate purposes.

The importance of countering terrorism financing (CTF)?

Terrorism activities cause harm that may be in the form of injury, loss or death to people affected by attacks or it may be in the form of economic destruction.

Terrorists depend on money and funds to operate, plan and execute their attacks. Depriving them of the funds they need is one of the most important steps in combating terrorism. An effective CTF regime will prevent financial flows from benefitting terrorists, thus preventing them from inflicting harm.

Targeted Financial Sanctions (TFS) regime for TF

As part of the CTF regime, targeted financial sanctions (TFS) mechanism is put in place for listing of specified entities under the AMLA. TFS involves mechanism to deny specified entities from making any transaction with any person in Malaysia.

The AMLA states that no citizen of Malaysia or body corporate incorporated in Malaysia shall, within or outside Malaysia, knowingly directly or indirectly:  

• provide or collect any property to be used by any Specified Entity;
• deal with property including funds derived from property owned or controlled by any Specified Entity;
• enter into or facilitate any transaction related to property owned or controlled by any Specified Entity;
• provide any financial or other related services to any Specified Entity; or
• make available any property or any financial or related services for the benefit of any Specified Entity.

Specified entity refer to an entity in respect of which an ordernunder section 66B of of AMLA has been made, or is deemed by reason of the operation of subsection 66C(2) of AMLA to have been made, and is for the time being in force.

For additional information on sanctions, please see:

• targeted financial sanctions
• obligations related to terrorism financing and proliferation financing​​​​​​