After last week’s appalling events in France, many of us have been left wondering how the Islamic State was able to finance its co-ordinated terrorist attack in downtown Paris. In order to choke off the flow of funds to such groups, we need global buy-in to implement a critical set of reforms.

The Islamic State’s military expansion across Syria and northern Iraq has been partly funded by its control over oil fields, a flow of money that has been blunted by military bombing. But conducting attacks in the heart of Europe requires a complex series of financial transactions between IS supporters and the cells committing acts of terrorism.

Group of 20 leaders turned their focus to the financing question this week when they met in Antalya, Turkey. Leaders committed themselves to combatting terrorist financing by enhancing the exchange of information; criminalizing terrorist financing and implementing targeted financial-sanction regimes related to terrorism and terrorist financing; and facilitating the widespread implementation of standards developed by the Financial Action Task Force (FATF), the international institution responsible for combatting money laundering and terrorist financing.

By G20 leaders’ own admissions, there are critical gaps in the effort to stop terrorist financing. In a report issued by the FATF, it was emphasized that while financing terrorism has been criminalized in 190 of its 194 member jurisdictions, very few jurisdictions have obtained successful convictions. The designation of bank accounts and assets frozen due to connections to terrorists and terrorist financing is also highly uneven. Just 9 per cent of jurisdictions have proposed designations to the UN Sanctions Committee while 21 jurisdictions do not have the ability to freeze the assets of terrorists or financiers.

The global web of legislation needed to stop terrorist financing has glaring gaps that are easily taken advantage of by the Islamic State and its supporters – not to mention that many of the countries on the front lines of terrorism lack legal and financial capacity.

Efforts are also hampered by the lack of information exchange between countries. National laws have long restricted national regulators from exchanging confidential information with their foreign counterparts, under antiquated domestic laws.

Securities regulators are ahead of the curve after insider trading and terrorist threats prompted the International Organization of Securities Commissions to support the spread of model laws to facilitate information exchange across jurisdictions. But banking regulators remain laggards. It was not until the collapse of Lehman Brothers and AIG that G20 bank regulators pushed to reform domestic legislation to grant them the power to share information to assist in the orderly resolution of failing financial firms. It is unclear whether those powers extend to terrorist financing.

Efforts to put an end to terrorist financing face a critical difficulty in implementation. Convincing states to dedicate resources and political capital to revising legislation in far-flung parts of the world ranging from Angola to Uzbekistan will prove to be a unique political challenge. The G20 needs to recognize that these states need direct financial support to build capacity and implement these initiatives. Terrorists will continue to target the weakest links in the chain – it’s our responsibility to strengthen them.

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