Police suspect a company owned by the family of convicted terrorist Khaled Sharrouf may have been used to send more than $200,000 to the Islamic State militant group in Syria and Iraq.

The Sydney-based Bisotel Rieh money transfer company, which is a major hub for Australian Muslims sending money overseas, is being shut down after money laundering watchdog AUSTRAC found it involved a significant terrorism financing risk.

In a notice of suspension to the company last month, AUSTRAC said the company sent $21.3 million offshore this year but kept $9 million off the books and routinely failed to report the names of the people sending and receiving the cash.

Police told 7.30 they were investigating intelligence suggesting more than $200,000 was sent via Dubai to Sharrouf's long-time friend and brother in arms Mohamed Elomar in Syria.

Australian authorities suspect the pair are brigade commanders for Islamic State in Syria.

Last month, NSW Police and the AFP raided Bisotel Rieh with AUSTRAC, finding evidence of several recent transfers of at least $200,000 to Dubai.

There were no records showing who had sent or received the money.

Juan Zarate, who led the United States's hunt on the terrorist money trail after September 11 and went on to become president George W Bush's deputy national security adviser, told 7.30 a $200,000 payment could have "devastating" consequences.

"$200,000 in that environment – in the war environment – is a fortune," said Mr Zarate, who was the first assistant secretary of the US Treasury for terrorist financing.

"The two fighters could certainly live off that amount for a number of months, if not a couple of years.

"They could certainly use that to buy weaponry on the market, to influence or to recruit, and to expand their orbit and influence even within the group - $200,000 in the hands of a Western fighter is very dangerous.

"There's also things like facilitation payments, false passports and other things that could facilitate a Western cell to support movements abroad.

"Not just [supporting] the activities of the jihadis fighting in Syria and Iraq but also potentially supporting those who are willing to go back to Australia or somewhere [in] the West to attack.

"$200,000 may not sound like a lot in terms of the Islamic State budget, but in the hands of a couple of Western jihadis who may be trying to plan something, not just in the region but also in Australia, [it] could be quite devastating."

Company admitted smuggling cash into Lebanon

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 10 minutes 20 seconds 10 m Australians funding terrorist groups in Middle East identified ( Sean Rubinsztein-Dunlop )

In its notice of suspension to Bisotel Rieh last month, AUSTRAC said the company had sent about $18.8 million to Turkey and Lebanon between January and August this year and "routinely" failed to provide "the ultimate beneficiary details as to these transactions".

Bisotel Rieh had previously admitted to smuggling cash over the Turkish border into Lebanon, where it has been unable to secure a bank account despite having an office in Tripoli, a known gateway for funds destined for militants in Syria.

Singled out for investigation by AUSTRAC is a $226,123 transfer to Istanbul last month and $38,000 sent in July and August to Malaysia.

Malaysia has been a staging point for Australian militants heading to Iraq and Syria, including Sharrouf and Elomar.

Bisotel Rieh's owners, Ahmed Alwash and Damour Sharrouf, have strenuously denied funding terrorists.

"Bisotel acknowledges that Ms Sharrouf's brother, Khaled Sharrouf, is a member of a prescribed [sic] terrorist organisation and has in recent months engaged in shocking behaviour that is repugnant to Australian law and values, and that Ms Sharrouf herself finds abhorrent," it said in a statement released earlier this month.

The company has until October 27 to make submissions to fight the proposed cancellation of its registration.