The integrity the financial system is key to ensure the stability, development and growth of any country’s economy. Threats to the financial system need to be properly assessed and mitigated. One such threat is the funding of terrorism, where the financial system is abused to provide support to terrorists and terrorist organisations. Allowing this abuse contributes to prolonged conflict, societal harm, and financial instability. Hence the obligation on subject persons to apply measures in terms of the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR) to mitigate any possible abuse of one’s products and service to this end.

A phenomenon that has gained international attention is the abuse of crypto-assets and providers of crypto-asset services to raise funds by designated terrorist organisations currently involved in open conflict in the Middle East, as listed by the European Union and other jurisdictions. EUROPOL’s 2025 Terrorism Situation and Trend Report provides insights into how this can take place.  Other publicly available information on addresses linked to terrorists and terrorist organisations can further assist subject persons involved in this area with their activity and transaction monitoring and scrutiny obligations. A case in point would be the recent publication by the US Attorney’s Office for the District of Columbia on seizures of crypto-assets intended to finance Hamas.

The Financial Intelligence Analysis Unit (FIAU) and the Malta Financial Services Authority (MFSA) have already had occasion in the past to highlight the importance of robust controls to mitigate the risks associated with funding of terrorism, including through The Israeli – Palestinian Conflict Guidance Note. More recently, the MFSA has also had occasion to remark on the controls put in place in this area through its Dear CEO Letter on Mitigating the Risks of Terrorism Financing and Sanctions Evasion in Crypto-Asset Service Providers and Financial Institutions.

Both the FIAU and the MFSA are again reminding all subject persons, and especially those that may be more vulnerable to potential abuse due to the very nature of the products and services they offer as can be the case with crypto-asset service providers, about the importance to ensure that they have robust measures in place when it comes to:

• Risk Assessment
• Customer Risk Assessment and Screening Measures
• Ongoing Transaction Monitoring
• Reporting Obligations
• Staff Training and Governance Obligations

All subject persons are urged to ensure their compliance with the obligations under the PMLFTR and other applicable European and local legislation. Any instance of possible funding of terrorism that may be detected is to be reported to the FIAU without delay. The detection of any failure to comply with these obligations can, depending on the severity of the shortcoming, result in enforcement action. In addition, facilitating funding of terrorism, may result in criminal liability, if all conditions are met.