The Financial Action Task Force (FATF) has released a landmark report, Complex Proliferation Financing and Sanctions Evasion Schemes, which emphasizes the persistent vulnerabilities within the global financial system to weapons of mass destruction (WMD) and proliferation financing (PF). This call to action couldn’t come at a more critical time, as the international community grapples with ever-evolving methods of sanctions evasion and PF-enabled WMD programs.

Why this matters

Despite being among the most serious threats to global security, PF effectiveness remains shockingly low. According to the FATF, just 16% of countries assessed have demonstrated high or substantial effectiveness in Immediate Outcome 11, which is the ability to enforce targeted financial sanctions tied to UN Security Council resolutions on proliferation.

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This glaring gap reveals that illicit actors and state-linked networks continue exploiting weak technical compliance and fragmented enforcement. Unless countries and the private sector bolster these safeguards, proliferation facilitators will continue to exploit loopholes, particularly in financial networks often thought to be secure.

How proliferators are advancing their methods

The FATF report highlights four key typologies used to evade PF sanctions:

• Use of intermediaries: Shell and front companies obscure ultimate ownership and purpose
• Obscuring beneficial ownership: Complex ownership structures to hide connections to sanctioned actors
• Use of virtual assets & DeFi: Cryptocurrencies and decentralized platforms offer new anonymity, prompting FATF to warn of their abuse in PF
• Maritime channels: Concealing shipments of dual-use goods through complex maritime routes and falsified documentation

Of particular concern is the role of the Democratic People’s Republic of Korea (DPRK), identified as the most significant state-based PF threat. North Korea funds its WMD programs through diverse revenue streams, including cyber thefts such as the $1.5 billion breach of ByBit in February 2025, and illicit networks spanning overseas IT workers and front companies.

Boosting controls and cooperation

To combat these sophisticated schemes, FATF urges urgent and coordinated action across public and private sectors. The report highlights advanced enforcement tools and collaborative measures:

• Public–private partnerships to enhance information flow and refine suspicious activity report (SAR) criteria
• Detailed risk indicators to flag suspicious behavior, such as mismatched IP addresses or shell company structures
• Legal measures to shield beneficial ownership transparency
• Enhanced supervisory regimes across financial institutions and non-financial businesses
• Global coordination to harmonize controls with UN Security Council expectations and adapt to evolving PF tactics

The FATF report emphasizes that compliance must be both technical and effective. Implementing robust mechanisms isn’t enough. Countries need enforcement, coordination and continuous updating to stay ahead of proliferators.

The FATF’s expanding focus: Crypto and DeFi

A key addition to this report is FATF’s highlighting of cryptocurrency and decentralized finance (DeFi) as emerging hotspots for PF. These technologies offer low visibility pathways for illicit actors to move value across borders, often without triggering traditional financial compliance controls. IThe FATF is urging regulators and service providers to incorporate PF-specific red flags into their AML frameworks, address anonymizing tools and ensure adherence to targeted sanctions regimes.

A united front

The FATF underscores the urgent need for:

• Global coordination that aligns with international sanctions 
• Technical compliance and practical enforcement
• Adaptive tools and cross-sector collaboration that anticipate and neutralize new PF tactics
• Transparency in ownership and financial flows, closing loopholes that proliferators rely on

With the threats of nuclear, biological or chemical weapons looming, the world cannot afford complacency. The FATF’s report is clear. PF is a rapidly evolving challenge, powered by digital finance and clandestine networks. To stem the tide, the global community must strengthen legal frameworks, enhance transparency and embrace tighter public/private partnerships. Only then can we close the gaps that leave our world vulnerable to the next devastating WMD threat.

Download: Proliferation financing policy template