Complex Proliferation Financing and Sanctions Evasion Schemes

The Riffle

The threat of Proliferation Financing (PF) — the raising, moving, or making available of funds to support Weapons of Mass Destruction (WMD) programs — remains one of the most complex global financial challenges today. Despite decades of sanctions, state and non-state actors continue to find new ways to bypass restrictions, leveraging gaps in financial systems, digital innovations, and international trade.

A new FATF-focused briefing highlights how nations, financial institutions, and businesses must strengthen their defenses against these evolving risks

Why It Matters

• Global Gaps: Nearly half of FATF jurisdictions still lack adequate legal frameworks to tackle proliferation financing, while fewer than 20% effectively combat it.

• Key Threats: DPRK, Iran, and Russia remain central actors, supported by networks of intermediaries, shell companies, and criminal organizations.

• Rising Digital Risks: Virtual assets, anonymity-enhancing technologies, and DeFi ecosystems are increasingly exploited to move illicit funds across borders.

• Sectoral Weaknesses: From shipping to trade finance, vulnerable industries are routinely abused to conceal end-users and the ultimate destination of dual-use goods 

How Evasion Happens

The FATF identifies four major typologies that enable sanctions evasion:

1. Intermediaries & Shell Companies – Creating layers of front firms across jurisdictions to disguise true beneficiaries.

2. Obscured Beneficial Ownership – Exploiting weak transparency laws and loopholes in beneficial ownership registries.

3. Virtual Assets – Using crypto exchanges, mixers, and blockchain anonymity to launder billions, often linked to DPRK cyberthefts.

4. Maritime & Shipping Manipulation – Ship-to-ship transfers, falsified documents, and AIS “going dark” tactics to hide illicit trade routes

Key Challenges

• Regulatory Inconsistency: Diverging sanctions frameworks across jurisdictions create exploitable loopholes.

• Resource Constraints: Smaller nations and startups in financial services often lack tools to detect complex PF schemes.

• Information Sharing Gaps: Limited cooperation between governments and the private sector hampers early detection.

• Diplomatic Immunity: Exploited by sanctioned actors to move funds and goods under protection 

Good Practices to Counter PF

The report highlights actionable measures that both public and private sectors can adopt:

• Stronger SAR/STR Regimes – Mandatory suspicious transaction reporting tied to proliferation financing indicators.

• Public-Private Partnerships – Shared risk indicators, advisories, and typologies to guide financial institutions.

• Advanced Monitoring Tools – Leveraging blockchain analytics, satellite imagery, and AI-driven trade monitoring.

• Interagency & International Cooperation – Joint investigations, intelligence sharing, and multinational enforcement task forces 

Conclusion

Proliferation financing is not a distant geopolitical problem — it’s a present and systemic risk to global financial stability. As sanctions evasion grows in sophistication, financial institutions, regulators, and businesses must remain vigilant, investing in governance, compliance, and intelligence-led monitoring.

The FATF urges countries to take a collective leap forward — because in this arena, the weakest link in the chain can compromise the entire global system.

Read the full briefing document Presented by 10 Leaves here