By Elena Martynova, EU GLOCTER PhD Candidate, Seconded to CEP

Terrorist organizations fund themselves through a wide range of methods, including soliciting donations, exploiting legitimate businesses, and engaging in various forms of criminal activity. Groups such as Hezbollah and Al-Shabaab have historically relied on drug trafficking and extortion. They have also engaged in systemic forms of fraud. These include welfare diversion and the exploitation of charitable organizations, including through the establishment of front charities; through the extortion of charities operating in territories under their control, and; through deceiving donors who believe they are supporting legitimate humanitarian work. One somewhat underexplored form of fraud is the targeting of individuals by terrorist financiers to generate revenue.

Current Engagement

The U.S. Federal Trade Commission estimates that in 2024, consumers lost approximately $12.5 billion to scams conducted via phone calls, emails, and other schemes. Impersonation scams, in which perpetrators pose as the identities of others, such as law enforcement officers, are among the most prevalent. Some incidents include scammers posing as federal agents, falsely accusing scam victims of funding ISIS and demanding payments to avoid prosecution. Intriguingly, these scammers had no actual ties to ISIS, but nonetheless used the group’s fearsome name to intimidate and pressure their targets. In a case that directly funded a terrorist organization, a Boko Haram member and financier was arrested in Nigeria for impersonating a military brigadier general. He was accused of deceiving citizens, likely requesting bribes or gifts.

Romance scams, which have cost victims over $1 billion annually, have not been widely exploited by terrorist groups. While unverified reports suggested ISIS affiliates in South Africa used counterfeit dating profiles, these platforms are primarily leveraged for recruitment rather than financial gain. Interestingly, in one notable case, ISIS recruiters themselves were defrauded when three Chechen women scammed over $3,000 from the group through fake romantic engagement.

Investment fraud has become a major source of revenue for criminal organizations. Nonetheless, there is only one case of an individual simultaneously conducting investment fraud and financing terrorist training camps in Afghanistan and Pakistan. While terrorist organizations are increasingly using cryptocurrency, at present, there is no evidence of systemic terrorist involvement in large-scale investment scams, including “pig butchering” schemes. These scams, which involve criminals establishing trust with victims over time before tricking them into making significant fake investments, are prominent in the broader fraud landscape.

One of the most well-documented cases of scams pertains to the COVID-19 pandemic. ISIS was reportedly responsible for operating a counterfeit website and four Facebook accounts that claimed to sell personal protective equipment, such as masks. This appears to be more of an isolated and opportunistic incident rather than evidence of sustained terrorist involvement in maintaining scam websites.

Overall, there are only a few public cases of terrorists defrauding victims directly. While this phenomenon could be more widespread and simply underreported, evidence indicates that scams are not currently a primary fundraising mechanism for terrorist groups. Several factors likely explain this limited engagement:

• Alternative revenue streams such as donations, extortion, and trafficking may be more reliable.
• Operational risks are heightened in scams, as victims often report fraud to authorities, creating investigative leads that could expose broader networks.
• Resource demands for managing large-scale scams can be significant, making them less attractive relative to other illicit activities.

Future Risks: Technology and Criminal Collaboration

Despite their current limited role, scams should not be dismissed as a potential terrorist financing method. Emerging technologies, particularly automation and AI-generated text, images, and voice content, are reducing the costs and resource requirements of operating scams. In practice, fraud networks now often deploy AI-powered chatbots to conduct initial outreach in romance or pig butchering scams, sending personalized messages, responding to replies, and maintaining engagement until a ‘hook’ has been made and it is handed off to human operators. Similarly, voice-cloning tools allow scammers to impersonate trusted individuals like family members in real time to extort funds or authorize transactions. These innovations may lower barriers to entry, making scams more attractive to terrorist groups. Even if direct financial profit is not the objective, scams can provide access to compromised accounts, mule networks, or other tools useful for operational security.

Moreover, terrorist groups and organized crime syndicates have a history of collaboration in many regions, including in West Africa and South America. This cooperation may expand in the future. The United States has already designated several Mexican cartels as terrorist organizations, and countries such as Canada are beginning to follow suit. These groups have a long record of involvement in fraud schemes. For example, in the past month, the U.S. Department of the Treasury’s Office of Foreign Assets Control sanctioned four Mexican individuals and 13 companies linked to timeshare fraud orchestrated by the Cartel de Jalisco Nueva Generación. This scheme targeted U.S. timeshare owners through call centers in Mexico staffed by English-speaking telemarketers. Scams represent one possible area of overlap with terrorist organizations, given their profitability and established use by criminal groups.

Legal and Policy Implications

Most Western counterterrorism financing legislation, including in the US, Canada, and EU, requires proof that individuals knowingly or intentionally provided material support to terrorist organizations. This legal threshold means scam victims are highly unlikely to face prosecution. Nonetheless, the financial impact on individuals is severe, often amounting to tens or hundreds of thousands of dollars in losses. If terrorist groups were to scale their involvement in scams, the toll on victims could grow substantially. Moreover, a highly politicized terrorist attack financed through scam proceeds could create complex legal challenges, potentially setting adverse precedents in case law.

Scams ultimately represent a potential area of growth in terrorist financing given technological advances and the possibility of collaboration with organized crime networks. Policymakers should remain vigilant. Visibility into potential terrorism financing through scams could be enhanced by increasing information sharing on case studies and developing typologies, especially as investigations into terrorism financing and fraud are often siloed and handled by different teams. Structured red flags and case referral pathways would help both investigators and policymakers detect and distinguish between scams that simply invoke extremist names and genuine terrorism financing risks, and disrupt them accordingly. Enhanced monitoring of fraud typologies and proactive adaptation of counterterrorism financing frameworks will be essential to mitigate the risks posed by the convergence of terrorism, fraud, and new technologies.