In October, one month after the unsubstantiated, subsequently-retracted story that started this rumor (see https://ello.co/zooko/post/4oIyphoYjCmOmnu-HOAOEw), the British Treasury published a risk assessment document that explicitly said two things:
There was no evidence of terrorists using Bitcoin: “There is little evidence to indicate that the use of digital currencies has been adopted by criminals involved in terrorist financing, whether as a means by which to raise funds (crowd funding etc.), to pay for infrastructure (e.g. server rental), or to transfer funds.” and “…digital currencies are currently not a method by which terrorists seem to raise or move money…”
In the opinion of the British Treasury authors, the overall risk level associated with digital currencies was "Low", which was the lowest risk level on offer, in contrast to banks ("High"), accountancy service providers ("High"), Legal service providers ("High"), and Cash ("High"). See attached detail from the report.
Here's the full risk assessment report: