Tackling terrorism is not a new problem, either in Europe or anywhere else. However recent events, in particular the attacks in Paris and Brussels, have highlighted the need for a strong, coordinated response and more effective methods of cracking down on the ways terrorists get financing. In response to the increasing challenge terrorism poses, the European Commission put forward an action plan on 2 February to strengthen the fight against terrorist financing.    

Financing terrorist networks

Technological progress has fundamentally transformed the way we carry out financial transactions. However these same financial tools and new methods of payment, like prepaid cards or virtual currencies, can make it easier for terrorist networks to finance their activities anonymously.

The action plan aims to prevent terrorists from moving funds or other assets and make it easier to trace them through their financial movements. It should ensure solid and reliable safeguards when it comes to financial flows, in particular from high-risk non-EU countries. It will also focus on disrupting the sources of revenue used by terrorist organisations, by targeting their ability to raise funds – for instance through the illicit trade in cultural goods.  

'By detecting and disrupting the financing of terrorist networks, we can reduce their ability to travel, to buy weapons and explosives, to plot attacks and to spread hate and fear online,' Commission First Vice-President Frans Timmermans said at the presentation of the action plan in Strasbourg.

Prepaid cards and virtual currencies

Prepaid cards offer many advantages to regular, law-abiding citizens. Corporate prepaid cards can be used by companies to grant staff travel expenditure while travel prepaid cards are a practical substitute to travellers' checks. Prepaid cards also offer a means of payment to economically vulnerable or financially excluded people. However, some of these products are of an anonymous nature and investigators found that the terrorists used prepaid cards to fund the recent attacks in Paris. With the action plan, the Commission hopes to reduce the anonymous character of some segments of the prepaid card market and is examining ways to ensure that compulsory checks, known as 'customer due diligence', are carried out in certain circumstances.  

The action plan will also seek to build a better understanding of how terrorist groups could use virtual currencies to conceal financial transactions, as these can be carried out more anonymously. The Commission plans to ensure that virtual currency exchange platforms are subject to the 'know-your-customer' rules set out in EU rules against money laundering that were adopted in May 2015. This will make it easier to identify users who trade in virtual currencies because these platforms will have to verify the identity of people exchanging virtual for real currencies, thereby helping to avoid the anonymity associated with such exchanges.

Financial Intelligence Units

The action plan should also see the powers of EU Financial Intelligence Units enhanced. These are public authorities in every Member State that gather and analyse information about suspicious transactions spotted by banks, or any information relevant to money laundering or terrorist financing. Under the plan, Financial Intelligence Units will cooperate more closely and have better access to centralised bank and payment account registers and central data retrieval systems.

Some of the measures set out in the action plan will be implemented immediately, while others will be developed over the coming months. It is hoped that all the proposals will be implemented by the end of 2017.

Read more on the action plan