A terror financing investigation has uncovered about $500,000 in Australian cash sent to Indonesia to arm and train extremists and support their families.

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A joint investigation between Australia and Indonesia found the cash was raised and transferred by an Australian man identified only by the letter L.

The money was collected from donors in Australia — some of whom may not have been aware their money was to be used to fund terrorism.

The details were confirmed by Agus Santoso, the deputy chairman of Indonesia's financial tracking watchdog, the Financial Transactions and Analysis Centre (PPATK).

"The one in Australia is a local Australian, not an Indonesian who is living in Australia and sending money to Indonesia," he said.

"The money was used for: one, to recruit people; secondly to fund training; thirdly to buy weapons, and the fourth is to give livelihood for the terrorists' family because the money goes to support the families of the terrorists who died."

Around 200 Indonesians are believed to have gone to Syria to fight for the Islamic State militant group, with at least 60 of them killed.

PPATK chairman Muhammad Yusuf said some of the Australians who donated may not have realised their cash was going to fund extremism.

"It could be when it happened, from the perspective of the donor; it was meant for charity not for terrorism," he said.

Indonesia says the Australian cash may have been used to support local terror networks, such as the group of alleged extremists arrested a week ago.

So far, 11 people have been arrested across Java and accused of plotting attacks on the nation's minority Shiite community, Christians and possibly even westerners.

They were arrested by special forces from Indonesia's anti-terror body Densus 88.

Mr Santoso said information from Australia's counter-terrorism financing watchdog AusTrac was crucial to uncovering these Indonesian networks.

"We really appreciate the cooperation with AusTrac and the AFP. It revealed the terrorism network between Australia and Indonesia, the network has been revealed, and we have handed over the case to Densus 88 to follow up," he said.

Indonesia is still on a state of heightened terror alert, with particularly tight security for the nation's New Year celebrations.