Counterterrorism financing was never glamorous work. For most of my career at the State Department, it was national security’s back office: essential, technical, and mostly invisible. In my case, that was almost literally true. The counterterrorism finance and terrorist designations office I ran at State for more than ten years was housed in an annex across the street from the Harry S. Truman Building, or “Main State,” as we called it.
Suspicious activity reports, beneficial ownership filings, designation packages, and mutual evaluations at the Financial Action Task Force. These measures generated friction, and friction is what bad actors pay a premium to avoid. The U.S. architecture is being dismantled, not in a single piece of legislation but in a series of decisions since January 2025 that together reverse a quarter century of practice. The Trump administration paused enforcement of the Foreign Corrupt Practices Act. Treasury suspended penalties under the Corporate Transparency Act for domestic reporting companies, gutting the beneficial ownership rule that would align the United States with FATF recommendations. Foreign assistance freezes left counterterrorism capacity building in Africa, where jihadist violence is surging, in limbo. And the State Department designated six Mexican cartels, a Venezuelan gang, and an El Salvadoran gang as Foreign Terrorist Organizations in roughly a month, a pace that should be impossible if the standard interagency process were being honored.
Each decision is defensible on its own terms by someone. Taken together, they describe a country deliberately lowering friction in its own financial system at a moment when the cost of terrorism is dropping, and the tools available to terrorists are multiplying. Terror Disrupted, my book out this year from Cambridge University Press, argues that this architecture works not because it is dramatic, but because it turns legal authorities, financial intelligence, sanctions, and interagency coordination into sustained pressure.
The late, great Walter Laqueur wrote in 1977 that modern terrorists need a great deal of money. He was half right. They need money, but not always a great deal of it. The 1998 East Africa embassy bombings cost al-Qa’ida less than ten thousand dollars. The USS Cole attack was the same. The 2010 AQAP printer bomb plot, which forced a global overhaul of air cargo screening, cost forty-two hundred dollars. AQAP branded it Operation Hemorrhage. AQAP could not match American military power, so it sought to turn cheap plots into expensive American reactions. Death by a thousand cuts, they called it.
The cost associated with terrorist attacks has not changed, but two things around it have. First, terrorism’s overhead has migrated online. Salaries, propaganda, recruitment, legal defense, all of it now moves through merchandise sales, crowdfunding platforms, podcast subscriptions, and cryptocurrency wallets. The American radical right pioneered this model. Long before ISIS supporters were soliciting Bitcoin on Telegram, the Klan was selling belt buckles by money order and groups like the Proud Boys were funding January 6 travel through GiveSendGo. Most of what sustains a modern extremist movement is legal, which is precisely why it is hard to disrupt.
Second, the tools we built to disrupt the rest of it depend on cooperation. Targeted financial sanctions work because the dollar is the global reserve currency and banks would rather walk away from a relationship than lose access to it. Beneficial ownership transparency works because countries promise to pierce the veil that hides illicit money in shell companies. Foreign Terrorist Organization designations work because they trigger material-support prosecutions, asset freezes, and a regulatory ripple effect that makes a designated group radioactive. None of this is automatic. All of it requires that the United States demonstrate, year after year, that it takes the architecture seriously.
The cartel designations are the most visible symptom of the new approach. I argued in the Wall Street Journal in February that this was a mistake. Cartels are dangerous, violent, and rich. They are also criminal organizations driven by profit rather than ideology. Conflating them with terrorists may feel satisfying, but it will not give law enforcement tools it did not already have under the Kingpin Act and racketeering statutes. What it will do is force banks to file suspicious activity reports on a vastly expanded population of cartel adjacent transactions, which will bury the reporting that helps FinCEN analysts identify the next ISIS facilitator or AQAP operative. And, frankly, the designations of the cartels haven’t changed much for them – cocaine is still flowing into the US in abundance and, interestingly, federal drug prosecutions are down.
The cryptocurrency question runs in parallel. I take a measured view of crypto’s role in terrorist financing. The headlines often exaggerate its importance. Hamas tried fundraising in Bitcoin and largely retreated when blockchain analytics firms made the addresses traceable. But the administration’s strategic embrace of virtual assets, combined with deregulation of the conventional system, creates an arbitrage opportunity that did not previously exist. If beneficial ownership reporting is unenforced, FCPA prosecutions paused, and stablecoins integrated into the financial system as an alternative, the friction that defines a hostile environment for illicit finance becomes optional rather than systemic.
In the world of illicit finance, public private partnership is not a slogan. It is the operating model, since government’s have deputized national security work to the private sector. The Zoobia Shahnaz case, in which a Long Island woman was prosecuted for wiring more than one hundred fifty thousand dollars to ISIS through cryptocurrency, was initiated by intelligence that the FBI downgraded and passed to a private sector partner, which returned the positive identification. The financial trail did the rest. None of this happens if the channels between government and industry atrophy, and channels atrophy when the government stops showing up.
What I learned in more than a decade running terrorist designations at State is that this system absorbs neglect badly. When the United States announces it will not prosecute foreign bribery, every kleptocrat who launders terror finance through a shell company hears it. When Treasury says it will not enforce beneficial ownership penalties, every facilitator who hides clients behind nominee directors hears it. When eight FTO designations are pushed through in a month, every foreign government considering a politically motivated designation of its own dissidents takes notes.
Terrorism will not end. The cost of attacks is low and the grievances that motivate them are plentiful. The question is whether we are willing to keep standing the architecture that makes those attacks marginally harder, marginally slower, and marginally easier to interrupt. For most of the last twenty-five years during the post 9/11 world, the answer was yes. The answer is now uncertain, and the people who finance political violence are paying close attention.
