More than 100 federal and Victorian police raided properties in Melbourne on Tuesday to stem the flow of money to Middle East terrorists as authorities ramp up efforts to tackle homegrown terrorist threats.

Victoria Police charged a 23-year-old man arrested in the raids with intentionally providing funds to a banned terrorist group.

Police allege the Seabrook resident sponsored a US man with $12,000 to fight in Syria and was about to send more money. The arrest follows the shooting death last week of a Melbourne man believed to have attacked two officers with a knife outside a suburban police station.

• Melbourne man faces court on terror financing
• Counter-terror strike in Melbourne’s suburbs
• School attack, raids leave Muslims ‘shocked and afraid’

The arrest opens a new front in the fight against terror on Australian soil, and comes just weeks after the government pumped millions of dollars into the agency responsible for monitoring suspicious payments to offshore accounts.

Three weeks ago, Prime Minister Tony Abbott committed an extra $20 million in funding to AUSTRAC, the anti-money laundering agency, to stop terrorist funding.

The Prime Minister’s Office told The New Daily “the practice of terrorism financing continues to pose a national security risk to the Australian community”.

Speaking in Parliament, Prime Minister Abbott said those who fund terrorism were complicit in terrorist attacks.

“Anyone who supports terrorists is complicit in the dreadful deeds they do,” Mr Abbott said on Tuesday.

The boost in funding for AUSTRAC also coincided with the drafting of the Foreign Fighters Bill, which was passed by the Senate last week.

The laws, under consideration by Parliament’s joint committee on intelligence and security, will introduce a broad new offence of advocating terrorism. It will also allow the government to cut off welfare payments for those who pose a threat to national security.

Attorney-General George Brandis said the ability to stop welfare payments was introduced for fear this money might be used to fund terrorism.

More than 100 police raided seven Melbourne properties on Tuesday. Photo: AAP

According to the Prime Minister, severe penalties up to life imprisonment already exist for those found guilty of funding terrorism.

A report released by AUSTRAC on the anniversary of the September 11 attacks revealed that while there is a relatively low incidence of terrorism funding in Australia, the practice continues to pose a national security risk.

The report cites the conflicts in Syria and Iraq, the base of terrorist organisation the Islamic State, as the biggest risk areas for illegal transfers.

In the report, AUSTRAC said the remittance sector, popular with migrant communities, is “an attractive vehicle for terrorism financing”.

“Along with the banking sector, it carries a higher risk than most other channels of being exploited to transfer funds for terrorism financing,” the report said.

“Remittance dealers who rely on ethnic or cultural links to send funds to high-risk terrorism jurisdictions are at greatest risk of being abused.”

An alleged example is that of Bisotel Riah, a money remitter based in Sydney, whose registration AUSTRAC intends to permanently cancel in November.

The company, owned by relatives of convicted terrorist Khaled Sharrouf, has been suspended from trading since early September amid concerns it tried to hide $9 million in fund transfers from authorities.

Police remove evidence seized during Melbourne terror raids. Photo: AAP

Acting AUSTRAC chief John Schmidt has said the continued registration of the business “may involve a significant financing of terrorism risk”.

Every electronic overseas transaction must be reported to AUSTRAC, although the anti-money laundering agency was unable to clarify to The New Daily whether encrypted currencies such as Bitcoin are also capable of being monitored.

According to the AUSTRAC report, funds for terrorism financing are often sent in relatively small amounts so as not to arouse suspicion, which makes them difficult for law enforcement agencies to detect.

These donations are likely to be dwarfed by the millions of dollars the Islamic State receives each day in oil royalties and the taxes it extorts from populations under its control.

Global Terrorism Research Centre director Greg Barton told The New Daily the recruitment of radicalised Australians to fight in the Middle East is a bigger threat than the flow of small donations.

“The Islamic State sits on a war chest of $2 billion, so they hardly need thousands of dollars from kids in suburbs of Melbourne,” Professor Barton said.

Victoria Police declined to comment, and the Attorney-General’s Department did not respond in time for publication.