star-1
star-2

TACT: Terrorism Act

Definition

The Terrorism Act (commonly referred to as TACT) is a legislative framework enacted to define terrorism-related offences, establish investigative and enforcement powers, and provide legal mechanisms for preventing, detecting, and prosecuting terrorist activities.

In AML/CFT contexts, TACT plays a critical role by criminalising terrorist financing, enabling asset freezing and forfeiture, and supporting intelligence-led disruption of financial flows linked to terrorism.

TACT provides the statutory basis for identifying terrorist organisations, individuals, and activities, and it underpins the obligations imposed on financial institutions and other regulated entities to prevent misuse of the financial system for terrorism-related purposes.

Explanation

TACT was introduced to create a comprehensive legal response to modern terrorism, addressing both violent acts and the supporting financial, logistical, and organisational infrastructure.

Unlike traditional criminal laws that focus on completed offences, TACT is designed to intervene at earlier stages, such as preparation, facilitation, or funding, recognising that terrorism poses systemic and national security risks.

From an AML/CFT perspective, TACT extends beyond physical acts of violence to include financial contributions, fundraising, movement of funds, provision of economic resources, and indirect support to terrorist entities.

This expansive scope allows authorities to target the financial lifelines of terrorist organisations, disrupt networks, and prevent future attacks.

TACT operates in conjunction with other counter-terrorism, sanctions, and financial crime laws, forming a legal bridge between law enforcement, intelligence agencies, financial regulators, and reporting entities.

TACT in AML/CFT Frameworks

TACT is foundational to Counter-Terrorist Financing (CTF) regimes.

It establishes the legal basis for:

  • Criminalising the provision, collection, or movement of funds for terrorist purposes.
  • Designating terrorist organisations and individuals whose assets must be frozen.
  • Enabling information sharing between financial institutions, regulators, and law enforcement.
  • Supporting suspicious transaction reporting related to terrorism financing indicators.

Financial institutions rely on TACT-linked designations and prohibitions to implement sanctions screening, transaction monitoring, and escalation protocols.

Failure to comply with TACT-driven obligations can result in severe criminal, civil, and regulatory consequences.

In practice, AML systems must be calibrated to detect not only large or unusual transactions but also small, structured, or seemingly benign transfers that may indicate terrorist financing.

Key Components of the Terrorism Act

Definition of Terrorism

TACT typically defines terrorism broadly, encompassing acts intended to:

  • Influence governments or intimidate the public.
  • Advance political, ideological, religious, or extremist causes.
  • Cause serious violence, damage to property, disruption of essential services, or threats to national security.

This definition provides the legal threshold for triggering investigative and enforcement powers.

Terrorist Financing Offences

TACT criminalises a wide range of financial activities, including:

  • Providing or collecting funds for terrorist purposes.
  • Possessing funds with knowledge or suspicion that they may be used for terrorism.
  • Facilitating the movement, concealment, or storage of terrorist funds.
  • Entering arrangements that make funds available to terrorists, directly or indirectly.

Importantly, an offence may occur even if the terrorist act does not ultimately take place.

Proscription and Designation Powers

TACT authorises governments to proscribe terrorist organisations.

Once proscribed:

  • Membership, support, or fundraising becomes a criminal offence.
  • Financial institutions must immediately freeze assets linked to designated entities.
  • Any transaction involving a proscribed organisation is prohibited.

These provisions form the legal backbone of terrorism-related sanctions screening.

Asset Freezing and Forfeiture

TACT enables authorities to:

  • Freeze assets suspected to be linked to terrorism.
  • Seize and forfeit funds and economic resources used or intended for terrorist purposes.
  • Prevent access to financial services by designated individuals or groups.

Asset freezing is a preventive tool designed to disrupt operations before attacks can be executed.

Risks & Red Flags Related to TACT Compliance

Financial institutions face unique risks when terrorist financing intersects with legitimate financial activity.

Key red flags include:

  • Small-value, repetitive transactions inconsistent with the customer profile.
  • Use of charities, non-profits, or informal networks to move funds.
  • Transfers involving high-risk jurisdictions or conflict zones.
  • Sudden changes in transaction behaviour without economic rationale.
  • Use of cash-intensive channels or alternative remittance systems.

TACT obliges institutions to act on suspicion, not certainty, reinforcing the importance of early escalation.

Common Methods Used to Circumvent TACT Controls

Terrorist networks continuously adapt their methods to evade detection.

Common techniques include:

  • Structuring transactions below reporting thresholds.
  • Using third-party intermediaries or unwitting individuals as fund conduits.
  • Exploiting humanitarian aid, charities, or crowdfunding platforms.
  • Leveraging digital assets, prepaid instruments, or informal value transfer systems.
  • Moving funds through multiple jurisdictions to obscure origin and destination.

These methods exploit speed, anonymity, and fragmentation within the financial system.

Examples of TACT-Relevant Scenarios

Charity-Based Fund Diversion

A registered charity raises funds for humanitarian purposes but diverts a portion to individuals linked to a proscribed organisation.

Even small diversions can constitute a TACT offence if knowledge or suspicion exists.

Micro-Financing of Extremist Cells

Multiple individuals send low-value transfers to a single recipient over time.

Individually, transactions appear benign, but collectively they finance logistics or propaganda activities.

Cross-Border Facilitation

Funds are routed through multiple countries using informal channels before reaching a conflict zone.

The layered movement complicates tracing but remains prosecutable under TACT provisions.

Impact on Financial Institutions

Non-compliance with TACT obligations exposes institutions to significant consequences:

  • Criminal liability for knowingly or negligently facilitating terrorist financing.
  • Regulatory sanctions, fines, and licence restrictions.
  • Severe reputational damage and loss of correspondent relationships.
  • Increased supervisory scrutiny and remediation costs.

Institutions must demonstrate that they have taken reasonable, risk-based steps to prevent misuse of their services.

Challenges in Implementing TACT Controls

Despite strong legal frameworks, enforcement presents challenges:

  • Terrorist financing often involves small amounts that resemble normal consumer behaviour.
  • Intelligence on emerging threats may lag behind transactional activity.
  • Data silos hinder holistic visibility across products and jurisdictions.
  • Overly aggressive controls risk financial exclusion and false positives.

Balancing security, proportionality, and operational efficiency remains a persistent challenge.

Regulatory Oversight & Governance Expectations

Supervisors expect institutions to implement robust governance aligned with TACT, including:

  • Board-level oversight of CTF risk management.
  • Clearly defined policies addressing terrorism financing risks.
  • Ongoing staff training on TACT-related obligations and indicators.
  • Effective transaction monitoring and escalation mechanisms.
  • Timely filing of suspicious transaction or activity reports.

Institutions must also demonstrate cooperation with law enforcement and intelligence agencies when required.

Importance of TACT in AML/CFT Compliance

TACT is central to protecting the integrity of the financial system and national security.

Effective implementation enables institutions to:

  • Disrupt terrorist networks by cutting off funding channels.
  • Meet legal and regulatory obligations under CTF regimes.
  • Support intelligence-led investigations and prosecutions.
  • Protect reputational capital and stakeholder trust.
  • Contribute to broader domestic and international security objectives.

As terrorist methodologies evolve, the continued relevance of TACT depends on adaptive enforcement, cross-border cooperation, and the integration of financial intelligence into counter-terrorism strategies.

Related Terms

  • Terrorist Financing
  • Proscribed Organisation
  • Asset Freezing
  • Suspicious Transaction Report
  • Counter-Terrorist Financing
  • Sanctions Screening

References

Ready to Stay
Compliant—Without Slowing Down?

Move at crypto speed without losing sight of your regulatory obligations.

With IDYC360, you can scale securely, onboard instantly, and monitor risk in real time—without the friction.

Get a Demo
charts charts-dark