Facing the Myths Surrounding Proliferation Financing

In February, the Financial Action Task Force (FATF)—an intergovernmental body responsible for promoting policies to protect the global financial system—released a report on the financing of WMD proliferation. The new report is a much-anticipated update to the task force’s aging 2008 guidance on proliferation financing. But it is unclear whether the new guidance represents much change—if any—over the 2008 version.

In March, on the heels of the new FATF report, came a rather discouraging assessmentof proliferation financing by the Panel of Experts established under UN Security Council Resolution 1874. This assessment detailed several shortcomings in global sanctions implementation that have allowed North Korea to stay connected to international banking channels. The report concluded that North Korea is “flouting the most recent resolutions by exploiting oil supply chains, complicit foreign nationals, offshore company registries, and the international banking system.” North Korea, according to the report, continues to skirt targeted financial sanctions by obfuscating the true beneficiaries of accounts it owns and transactions in which it participates. The panel cited several instances in which North Korean entities have been able to evade “rudimentary due diligence checks” by using front companies registered in offshore secrecy jurisdictions such as Seychelles and the British Virgin Islands—jurisdictions that, for a fee, will provide a degree of corporate anonymity.