New Age Terror Finance: ISIL-K Weaponises Gaming, Crypto, & Wallet Apps Into Global Arsenal - India On Edge

Mumbai: Financial Action Task Force (FATF), the global anti-money laundering watchdog, has raised concerns over the increasing use of digital platforms including virtual assets, mobile wallets, and online gaming platforms, by terrorist groups such as ISIL-Khorasan (ISIL-K) to fundraise, recruit, and communicate. This trend has triggered alarm across South and Central Asia.  

According to the FATF's Comprehensive Update on Terrorist Financing Risks in July 2025, ISIL-K has aggressively expanded its influence beyond Afghanistan and Central Asia, using a hybrid of propaganda, cryptocurrency-based funding, and digital platforms to attract recruits. Though the report refrains from naming specific countries, senior Indian security officials confirm that the trends mirror recent cases detected in parts of Kerala, Jammu & Kashmir, and other sensitive regions. 

“ISIL-K continues to pose a significant threat in Afghanistan but also in Europe and Central Asia, where it actively seeks to recruit and fundraise relying on advanced propaganda tactics,” the report states, underscoring the outfit’s global ambitions and digital footprint.

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Key Concern Outlined In The Report

A key concern outlined in the report is the weaponisation of online gaming platforms by terror outfits. These platforms, which attract millions of young users and often operate with minimal regulatory oversight, are being misused to launder money and communicate covertly. FATF points out that many games feature in-game currencies, voice chats and private messaging tools features that make them fertile ground for radicalisation and secret transactions.

“Gaming platforms are becoming digital gateways for terrorism financing and radicalisation. ISIL operatives have reportedly monetised in-game currencies by converting them into fiat currency and used them for terror-related activities,” the report said.

FATF identified documented instances where digital reward systems within online games typically designed for player progression and in-game purchases were manipulated to generate real monetary value. Operatives exploited third-party marketplaces and grey-market exchanges where in-game currencies, points, or digital assets could be traded for cash. By converting these gaming points into real-world currency, ISIL was able to fund operational logistics without triggering red flags in the formal banking system. This tactic not only allowed them to circumvent financial surveillance but also masked the origin and flow of funds behind layers of anonymous transactions across jurisdictions. 

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Adding a critical layer to the digital terror-financing ecosystem, the  FATF flagged the growing misuse of virtual assets and cryptocurrency wallets by ISIL-K. In its latest risk assessment report, the report underscores a “systemic” shift in how terror networks are increasingly relying on cryptocurrencies like Bitcoin, Tether (USDT), and Monero to fund their propaganda campaigns, recruitment drives, and operational logistics.  

According to the report, ISIL-K and similar groups are using encrypted messaging platforms such as Telegram to circulate crypto wallet addresses and QR codes, allowing them to solicit anonymous donations from sympathisers across borders. These contributions are often routed through peer-to-peer transactions, unlicensed or unregulated Virtual Asset Service Providers (VASPs), decentralised exchanges, and mixing services methods that significantly obscure the origin and destination of funds. FATF also flagged ISIL-K’s digital magazine, Voice of the Khorasan, which is used to solicit crypto donations, urging global action to curb this rising threat. The use of anonymity-enhancing tools makes traceability difficult and poses a growing challenge to financial intelligence units globally.  

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The FATF’s report also highlights the growing misuse of mobile payment services and digital wallets by terrorist groups, particularly in poorly regulated regions. These wallets are often registered with fake or stolen identities, bypassing KYC protocols, and are linked to encrypted apps like WhatsApp and Telegram for anonymous, real-time fund transfers. The report notes widespread abuse of SIM-based wallets in African and South Asian areas, where local agents help cash out funds without oversight. Terror groups use these platforms to pay recruits, fund logistics, and support sleeper cells with operations extending into Central Asia and India. FATF warns that decentralised systems, lack of unified AML compliance, and global regulatory gaps make enforcement difficult.