Security ministers from more than 20 countries meeting in Bali have been told that groups such as Isis (Islamic State0 are increasingly channelling funds into Southeast Asia to finance terrorism.
A regional risk assessment jointly prepared by Indonesia, Malaysia, Singapore, Thailand, the Philippines and Australia also warned that the use of charities and non-profit groups to support terrorism was rising.
Indonesia's financial intelligence agency - the PPATK - estimates that foreign sources transferred more than US$763,000 to fund terrorism in the country between 2014 and 2015.
"Given only small sums are required to stage a deadly attack, even modest amounts of funding from foreign terrorist groups pose a significant risk to the region's security," the assessment said. "The cross-border movement of cash is the highest-risk method of moving terrorism funds across the region."
The assessment also said that porous land borders and close maritime boundaries allow extremists and terrorist networks in parts of the region to move funds across borders with ease, adding that poor visibility over cash smuggling routes compounds the problem.
The counter-terrorism financing summit, also attended by representatives from countries including the US, India, the UK and China, is the first major gathering of international counter-terrorism officials since attacks earlier this year in France, Germany, the US and Indonesia. Bali itself was hit by a terrorist bombing in 2002 that killed more than 200 people.
Scott Stewart, vice-president for tactical analysis at the US-based private sector security firm Stratfor, said that while the regional terrorism threat had fallen a notch since the Bali attacks, cells with the ability to conduct small-scale attacks using pipe-bombs and firearms remained a concern.
"They have really been able to take out a lot of the experienced terrorist cadre," Stewart said. While it didn't take much to carry out a small attack, he said, part of limiting that threat was following the money.
"If the money is allowed to flow in freely that's going to give them a lot more latitude to not only pay recruits, to bribe officials, to acquire the raw materials to construct bombs, to buy cars, safe houses, other things, Stewart said. "It's really significant to keep those money flows constrained as much as possible."
The report called for deeper intelligence cooperation and the strengthening of domestic and regional frameworks to help underpin efforts to counter terrorism financing. It also warned that small funds sent through the banking and remittance sectors were hard to distinguish from ordinary transactions.
Addressing the increase in the frequency and severity of terrorist attacks globally in a speech at the summit, Australian Justice Minister Michael Keenan said individuals unknown to authorities were becoming quickly radicalised and carrying out violent attacks.
"International terrorism will be generational - it will confront us for decades to come," Keenan said. "We must work closely and in collaboration with regional and global partners to disrupt terrorism financing and to combat this threat. Large terrorist organisations such as Isis rely on networks and facilitators enabled by criminals, corrupt officials and others co-opted or willfully blind to their endeavours both within and outside their territory."
In December last year, a joint investigation by Indonesian and Australian authorities uncovered a suspected terror financing conduit through which US$384,000 had been sent from Australia to Indonesia to recruit and arm extremists, as well as supporting their families. Since 2006, seven people have been convicted in Australia for offences related to terrorism financing from a total of 21 individual prosecutions.