Definition and legal classification of terrorism financing
The term terrorism financing refers to providing, collecting or transferring financial resources intended to support terrorist acts or terrorist organizations. The financing can stem from both legal and illegal sources and includes all acts aimed at making financial resources available for the planning, preparation or execution of terrorist activities.
Both internationally and nationally, terrorism financing is considered a serious criminal offense, which has the potential, among other things, to significantly endanger societal security and state order. Combating this phenomenon is a central component of global anti-terrorism strategies and is supported by a multitude of legal provisions.
International legal framework on terrorism financing
United Nations
As early as 1999, the International Convention for the Suppression of the Financing of Terrorism (short: Terrorism Financing Convention) was adopted by the UN General Assembly. The convention obligates member states to introduce comprehensive criminal provisions against the financing of terrorist activities and to establish measures for preventing and detecting terrorism financing.
Further international initiatives
In addition, the Financial Action Task Force (FATF) regulates international standards for combating money laundering and terrorism financing. FATF recommendations are globally authoritative for the establishment of prevention, sanction, and control measures within national legal systems.
European legal framework on terrorism financing
Directives and regulations of the European Union
The European Union has, through several directives, especially the Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (in particular EU Directive 2015/849 – Fourth Money Laundering Directive and its successors), established comprehensive regulations for the protection of the internal market. The objectives are the identification and reporting of suspicious financial transactions, the creation of central reporting offices, and the obligation of banks and other financial service providers to comply with strict due diligence requirements.
Sanctions regime
The enforcement of targeted financial sanctions against specific organizations, individuals, or states associated with terrorism is another significant element of the European legal framework.
National law on terrorism financing
Germany
Criminal liability under Section 89c of the Criminal Code
In the Federal Republic of Germany, terrorism financing is punishable in particular under Section 89c of the Criminal Code (StGB) . The offense covers providing or collecting assets with the knowledge or intention that they are to be used for terrorist purposes. The provision targets all forms of financial support for terrorist acts, regardless of whether the funds are actually used, or it is sufficient that they are made available for such purposes.Legal requirements of the offense:
- Providing or collecting assets,
- with knowledge or intent that the resources are to be used to carry out a terrorist offense or support a terrorist organization.
Penalties
Depending on the seriousness of the offense, the penalties range from six months to ten years’ imprisonment. Attempted acts are explicitly punishable (§ 89c (5) StGB).
Austria
Under Austrian law, terrorism financing is criminalized in Section 278d of the Penal Code . The provision, similar to German law, is based on an abstract endangerment and prosecutes the support of terrorist activities already at the preparatory stage.
Switzerland
In Switzerland, Art. 260quinquies StGB regulates the criminal liability of terrorism financing. This provision particularly criminalizes organizing and procuring money or other assets for terrorist activities.
Distinction from related offenses
Terrorism financing overlaps with other areas of criminal law. Particularly noteworthy are:
Money laundering
While money laundering aims at concealing the origins of illegally obtained assets, terrorism financing is not necessarily tied to an illegal origin of the funds – it may also come from legal income, provided the funds are used for terrorist purposes.
Support of a terrorist organization
Financial support of a terrorist organization is generally also covered by the respective criminal provisions, thus overlapping with terrorism financing. However, criminal liability for terrorism financing may already exist even without organizational involvement.
Prevention and investigation measures
Obligations for financial service providers
Banks, insurance companies, and other financial intermediaries are subject to extensive obligations to identify and monitor customers, as well as to report suspicious transactions to the respective central reporting offices (Financial Intelligence Units, FIU).
International cooperation
Cross-border prosecution of terrorism financing requires close cooperation between national and international authorities as well as efficient information exchange. This takes place, for example, based on mutual legal assistance agreements, Eurojust, Europol, and Interpol.
Sanctions and legal consequences
Asset confiscation and forfeiture
In cases of proven terrorism financing, courts may impose not only prison sentences but also forfeiture of the financed or provided assets as well as the profits derived therefrom. These measures serve both repressive and preventive purposes.
Lists of frozen assets
Sanctions are sometimes implemented by freezing accounts and assets that are associated with persons and organizations linked to terrorism.
Current challenges and developments
Terrorism financing is a dynamic phenomenon that keeps pace with global developments and technological innovations. Current challenges include, among others, the use of digital payment methods and anonymous financial transactions, for example via cryptocurrencies or alternative financial services, which is why regular adjustments to legal regulations at both the national and international level are necessary.
Summary
Terrorism financing encompasses all actions aimed at providing financial sources for terrorist activities. The term is governed by extensive criminal and preventive provisions both nationally and internationally. Legal regulations include, alongside prosecution and sanctioning of terrorism financing, preventive requirements for the financial sector and a range of internationally coordinated measures. The continuous development of new methods of terrorism financing continues to present significant challenges to courts, administration, and legislation.
Frequently Asked Questions
What are the legal bases for terrorism financing in Germany?
Terrorism financing is a criminal offense in Germany and its legal basis is found particularly in Section 89c of the Criminal Code (StGB). Numerous other regulations also apply, such as the Anti-Money Laundering Act (GwG), as well as provisions of the Banking Act (KWG) and the Foreign Trade and Payments Act (AWG). Substantial provisions also exist at the European level, especially in the form of EU regulations and directives to combat terrorism financing. These regulations provide for comprehensive due diligence, reporting, and documentation requirements – in particular for financial institutions and other entities as defined by the GwG. The legal requirements demand not only active prosecution but also preventive measures, such as risk assessments and internal safeguards to prevent and detect such crimes. International standards, such as the recommendations of the Financial Action Task Force (FATF), are continuously implemented in German legislation.
Who is required to report suspicions of terrorism financing?
The obligation to report, pursuant to Section 43 GwG, applies to so-called ‘obliged entities.’ These mainly include credit and financial institutions, insurance companies, lawyers, notaries, auditors, real estate agents, and other professionals explicitly named in the law. They are required, if there are facts indicating suspicion of terrorism financing, to immediately file a suspicious activity report to the Financial Intelligence Unit (FIU). This obligation exists regardless of whether the transaction actually took place or is merely planned. The person or institution involved may not disclose the suspicious activity report to the affected party (so-called ‘tipping-off’ prohibition). Violation of this obligation may lead to fines or criminal sanctions.
How do the penalties for terrorism financing differ from those for other economic crimes?
Penalties for terrorism financing under Section 89c of the Criminal Code are particularly harsh compared to other economic crimes. Prison sentences range from six months to ten years, and in especially severe cases, even more than ten years. The penalty range reflects the particular danger posed by this offense, as it can directly enable or support terrorist activities. In addition, depending on the manner of commission, further offenses such as participation in a terrorist organization (§ 129a StGB) or money laundering (§ 261 StGB) may also be prosecuted, leading to increased penalties. Attempt and negligence may also be punishable under certain circumstances; in addition, extensive forfeiture and confiscation measures may be imposed.
What role does international cooperation play in combating terrorism financing?
The cross-border nature of terrorism financing requires close international cooperation. Germany therefore actively cooperates with international partners and organizations such as the Financial Action Task Force (FATF), Interpol, Europol, and various UN and EU authorities. On the basis of mutual legal assistance agreements, information is exchanged between states and their investigative authorities. International sanction lists and monitoring measures also help to identify and stop financial flows potentially linked to terrorism financing at an early stage. The EU level also includes specific legal acts allowing measures for account identification, asset security, and sanctioning of persons and organizations suspected of terrorism financing.
What are typical compliance measures against terrorism financing in companies?
Companies subject to the Anti-Money Laundering Act must implement comprehensive compliance measures. These include conducting risk analyses, setting up internal control systems to prevent and detect suspicious transactions, and training employees regarding the existing legal requirements. Particularly important is the identification and verification of contracting parties (the ‘Know your customer’ principle), continuous monitoring of business relationships and transactions, and keeping records of suspicious activities. Companies are required to promptly report suspicious cases to the FIU and ensure seamless documentation. Regular internal and external audits to review and update the implemented measures are also legally required.
How does an investigation proceed in the event of suspected terrorism financing?
If terrorism financing is suspected, investigations proceed in several steps. Once a suspicious activity report is received by the FIU, it first examines the case and, if necessary, forwards the information to the competent law enforcement authorities (prosecution, police). Investigations then follow, which may include analysis of financial flows, searches, seizures, and, if necessary, operational measures such as surveillance or telecommunications monitoring. Investigations often take place in close cooperation with international partners and are supported by legal safeguards such as judicial orders. During the investigation process, accounts may be frozen, assets seized, and individuals temporarily detained. The process ends either with the termination of the proceedings or with the filing of charges at the competent criminal court. In the event of a conviction, severe penalties and further measures such as professional bans or asset confiscation may follow.
