TF Typologies in AML denote the specific techniques, channels, and red flags associated with terrorist financing (TF), distinct from traditional money laundering due to often smaller transaction sizes and legitimate-looking sources. These typologies catalog how funds are collected, moved, and used for terrorist acts, as identified by bodies like Brazil’s COAF, which lists six main types including misuse of non-profits and trade-based schemes. Financial institutions use them to profile risks beyond mere laundering of illicit proceeds.
Purpose and Regulatory Basis
TF Typologies enable proactive detection of terror funding by highlighting vulnerabilities in financial systems, ensuring institutions disrupt threats before harm occurs. They underpin a risk-based approach, prioritizing high-risk patterns to protect global security and financial integrity. Key regulations include FATF Recommendations, which mandate understanding TF risks; the USA PATRIOT Act, enhancing scrutiny of foreign accounts and terror asset seizures; and EU AMLD IV, specifying compliance for preventing TF through delegated acts.
When and How It Applies
Institutions apply TF Typologies during transaction monitoring, customer onboarding, and enhanced due diligence when triggers like high-risk geographies, rapid fund movements, or NPO affiliations appear. Real-world cases include Taliban networks using hawaladars for cross-border transfers and ISIL exploiting MVTS near conflict zones. For example, cryptocurrency campaigns on Telegram for donations or trade mis-invoicing signal activation, prompting alerts and investigations.
Types or Variants
FATF and national bodies classify TF Typologies into variants like donations to sham NPOs, social media fundraising, cryptocurrencies (e.g., Bitcoin/Tether), MVTS/hawala, trade-based laundering, and shell companies. COAF identifies six: legitimate business diversion, illicit crime proceeds, NPO abuse, high-value goods trade, factoring/credit cards, and transnational crimes. Emerging variants involve blockchain crowdfunding and FTF funding via border remittances.
Procedures and Implementation
Institutions implement via risk assessments classifying typologies by likelihood and impact, integrating into AML systems for alert prioritization. Steps include: (1) typology training, (2) scenario-based monitoring rules, (3) EDD for matches, (4) case management with data analysis, and (5) tech like AI for pattern detection. Controls encompass ongoing staff training, independent audits, and board oversight to ensure scalability.
Impact on Customers/Clients
Customers face transaction delays or holds if profiles match typologies, such as NPO donors or high-volume remitters, but retain rights to explanations and appeals. Restrictions include account freezes for suspected TF links, balancing security with minimal disruption—e.g., measuring average suspension time for legitimate users. Interactions involve transparent notifications, reducing drop-offs from compliance friction.
Duration, Review, and Resolution
Reviews occur within days for initial alerts, escalating to weeks for complex cases, with resolutions via no-further-action or escalations. Ongoing obligations include periodic re-assessments; FATF guidance stresses timely disruption without fixed global timeframes, varying by jurisdiction. Resolutions document rationale, closing loops efficiently.
Reporting and Compliance Duties
Institutions must file Suspicious Activity Reports (SARs) for typology matches to FIUs, maintaining records for five-plus years. Documentation covers alerts, investigations, and decisions; penalties for non-reporting include fines like Rs. 5,000-10,000 per default in some regimes, plus reputational damage. Duties extend to training and system updates.
Related AML Terms
TF Typologies interconnect with ML Typologies (sharing channels like TBML), CTRs, STRs, PEP screening, and sanctions lists. They inform RBA, where geographic/typology risks calibrate CDD; proliferation financing evasion also overlaps. Predicate offenses link TF to crimes funding terror.
Challenges and Best Practices
Challenges include evolving tech like blockchain, alert overload, and NPO abuse detection amid low volumes. Best practices: prioritize via risk scoring, define workflows, leverage AI, collaborate with FIUs, and conduct typology-specific training. Tailor to sectors like real estate or remittances.
Recent Developments
FATF’s 2025 Comprehensive Update highlights NPO exploitation, crypto crowdfunding, and hawala persistence, urging tech defenses. June 2025 Plenary updated Recommendation 16 (Travel Rule) for VASPs above USD/EUR 1,000, effective by 2030, plus gaps in proliferation financing. Egmont Group notes six NPO abuse methods.
TF Typologies remain vital for safeguarding financial systems against terror threats, demanding vigilant, adaptive compliance.