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The Financial Action Task Force (FATF) has raised red flags over the growing misuse of e-commerce platforms and digital payment services for terror financing, citing case studies from India, including the 2019 Pulwama terror attack and the 2022 Gorakhnath Temple incident.

In its latest report, Comprehensive Update on Terrorist Financing Risks, the global watchdog warned that terrorists are leveraging online marketplaces and peer-to-peer payment apps to procure materials, move funds, and support operational needs — often with little traceability.

FATF revealed that aluminum powder, a key component used in the improvised explosive device (IED) in the 2019 Pulwama attack, was purchased via e-commerce platform Amazon. The attack, orchestrated by Pakistan-based Jaish-e-Mohammed, killed 40 CRPF personnel and remains one of the deadliest assaults on Indian forces in recent memory.

Indian authorities have charged 19 individuals under the Unlawful Activities (Prevention) Act, including seven foreign nationals, and recovered properties linked to the act. FATF noted that this kind of procurement underscores how online retail ecosystems can be exploited for terrorism.

Gorakhnath: PayPal and VPNs Used to Fund ISIL

In another case, the 2022 attempted breach at Gorakhnath Temple in Uttar Pradesh involved an ISIL-inspired lone actor who used PayPal to send ₹6.7 lakh (approx. $7,700) to foreign recipients. The individual used 44 third-party international transactions and VPN services to hide his identity and location. Funds were also received from abroad, suggesting a two-way flow of terror financing.

FATF said PayPal later suspended the account due to suspicious activity. This incident, it added, shows how fintech tools — though efficient and accessible — can offer enhanced anonymity for terrorists unless stricter monitoring is enforced.

FATF also flagged “state sponsorship of terrorism,” citing evidence from various jurisdictions that some terrorist groups continue to receive financial, material, and logistical support from national governments. While it did not name countries, India has consistently pointed to Pakistan’s involvement in supporting cross-border terrorism and using multilateral funds for arms procurement.

A New Front in Terror Finance

E-commerce platforms (EPOMs), FATF warned, are increasingly being used not just to buy materials, but to sell goods to generate revenue from low-cost items to merchandise pushing extremist ideologies. The trade-based laundering model involves terrorists buying and shipping products via EPOMs, which are then resold abroad to generate funds.

Additionally, peer-to-peer payment systems embedded within social networks allow terrorist groups to solicit donations, launch crowdfunding, and disburse funds from a single platform — often without passing through formal financial systems.

Online payment services, especially those provided by fintechs, pose unique challenges to law enforcement. Unlike traditional wire transfers, these platforms offer pseudonymous accounts and reduced oversight, FATF said, making it difficult to track initiators and beneficiaries.

The watchdog urged countries to adapt regulatory and investigative frameworks to address these digital blind spots, warning that the convergence of technology, e-commerce, and terror financing is escalating rapidly.

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FATF flags use of e-commerce and payment apps in terror financing, cites Pulwama and Gorakhnath cases

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