FATF Report highlights major gaps in global response to Proliferation Financing and Sanctions Evasion

Despite the grave threat posed by proliferation financing (PF), only 16% of countries assessed by the FATF and its Global Network have demonstrated high or substantial effectiveness in Immediate Outcome 11 which evaluates countries’ effectiveness in implementing targeted financial sanctions under the United Nations Security Council Resolutions (UNSCRs) on proliferation.

The report underscores that unless both the public and private sectors urgently bolster technical compliance and effectiveness, those seeking to finance WMD proliferation will continue to exploit weaknesses in existing controls.

Report

Evolving threats and global risks

The report provides a detailed analysis of the evolving methods and techniques used to evade PF-related sanctions, including those imposed under Recommendation 7 of the FATF Standards, as well as other national and supranational regimes beyond the FATF Standards, to inform the reader on how those seeking to evade PF-related sanctions could be doing so. It outlines how proliferation networks are sourcing dual-use goods, technologies, and knowledge—often through procurement networks and front companies—and using various financial channels to access the global financial system.

Based on the current global PF threat, the Democratic People’s Republic of Korea (DPRK), is recognised in the report as the most significant actor. Numerous actors related to the DPRK’s WMD programme are subject to UN sanctions which are covered by the FATF Standards. There are two main aggravating factors contributing to the DPRK’s financing of its WMD programme: the DPRK’s increasing financial connectivity and the diversity of the DPRK’s revenue generation. It has generated billions of dollars through cyberattacks targeting virtual asset-related companies, such as the theft of USD 1.5 billion from ByBit in February 2025. Other sources of revenue include income from overseas IT workers and illicit activities across a range of sectors.

Illicit actors are employing increasingly sophisticated methods to evade sanctions and circumvent export controls. Based on submissions from across the FATF Global Network, the report identifies four major typologies used in sanctions evasion:

• Use of intermediaries to evade sanctions
• Obscuring beneficial ownership information (BOI) to access the financial system
• Using virtual assets and other technologies
• Exploiting the maritime and shipping sectors

Strengthening global response

To support countries in responding to these challenges, the report outlines common enforcement obstacles and shares examples of good practices, such as public-private partnerships to improve information sharing, and the issuing of detailed alerts to make it easier for financial institutions to file Suspicious Activity Reports and Suspicious Transaction Reports.

The report also provides a set of practical risk indicators to help competent authorities and the private sector detect evasion, such as the use of shell companies or IP addresses not matching the customer’s reported location.

The proliferation of WMD remains a serious global concern, and this report aims to enhance understanding of current PF threats and vulnerabilities, while supporting the FATF Global Network in strengthening CPF controls in a risk-based and targeted manner. It highlights the need for a more coordinated and globally consistent response—one that aligns with existing international obligations and reflects the complexity of current PF and sanctions evasion schemes, as well as the catastrophic consequences that failure to act could entail.

Info: The Financial Action Task Force (FATF)