Terrorist financing refers to funds that support or enable terrorist activity. It may involve funds raised from legitimate sources, such as personal donations and profits from businesses and charitable organizations, as well as from criminal sources, such as the drug trade, the smuggling of weapons and other goods, fraud, kidnapping and extortion.

Terrorists use techniques like those of money launderers to evade authorities' attention and to protect the identity of their sponsors and of the ultimate beneficiaries of the funds. However, financial transactions associated with terrorist financing tend to be in smaller amounts than is the case with money laundering, and when terrorists raise funds from legitimate sources, the detection and tracking of these funds becomes more difficult.
To move their funds, terrorists use the formal banking system, informal value-transfer systems, Hawalas and Hundis and, the oldest method of asset-transfer, the physical transportation of cash, gold and other valuables through smuggling routes.