Money laundering is the process of concealing the illicit origin of proceeds of crimes, while terrorist financing involves the collection or provision of funds for terrorist purposes. In the case of money laundering, the funds are always of illicit origin, whereas in the case of terrorist financing, funds can stem from both legal and illicit sources. The primary goal of individuals or entities involved in the financing of terrorism is not necessarily to conceal the sources of the money but to conceal both the funding activity and the nature of the funded activity.
Similar methods are used for both money laundering and the financing of terrorism. In both cases, individuals make an illegitimate use of the financial sector. The techniques used to launder money and finance terrorist activities are very similar, and in many instances, they are identical. An effective anti-money laundering/counter-financing of terrorism framework must therefore address both risk issues: it must prevent, detect, and punish illegal funds entering the financial system and the funding of terrorist individuals, organizations, and/or activities. Additionally, AML and CFT strategies converge; they aim to attack the criminal or terrorist organization through its financial activities and use the financial trail to identify the various components of the criminal or terrorist network. This implies putting in place mechanisms to scrutinize all financial transactions and detect suspicious financial transfers/transactions.