Jacqui Lambie is threatening to introduce a private senator's bill to stop what she believes is "halal money" funding terrorist group Islamic State.
In a late-night address to the upper house on Tuesday, the outspoken independent senator questioned whether halal certification funds militants in Syria and Iraq.
She said she was prompted to look into the issue after receiving hundreds of emails from concerned residents.
A study the Tasmanian senator commissioned the parliamentary library to examine exposed some "surprising facts" that alarmed her.
Certifiers are not legally required to disclose their fees, nor is there a formal reporting or auditing system to ascertain whether funds are being misused, she says.
"Given that our enemies in Islamic State are receiving a steady cashflow to control their caliphate in Syria and Iraq, why isn't there a legal requirement in Australia for halal certification fees to be disclosed?" Senator Lambie said.
"And given that our nation is on high terrorism alert, while hundreds of Australian Islamic State sympathisers are fighting our ADF forces in Iraq, why is there is no formal reporting or auditing mechanism in Australia to ascertain whether monies paid for halal certification are misused?"
Senator Lambie warned if the government failed to answer her questions, she would introduce legislation to close such "legal loopholes".
"(The loopholes) could allow financing of terrorists and Australia's enemies through halal money," she said.
She's not the first politician to raise the issue.
Nationals MP George Christensen last year wrote an opinion piece suggesting consumers who bought halal products could be funding Islamic extremism.
