Sanctioned Nations Utilize Cryptocurrency to Support Armament—FATF Cautions of “Exponential” Increase

The Financial Action Task Force (FATF) has issued a stern alert regarding the increasing utilization of cryptocurrencies by sanctioned nations to finance weapons initiatives.

In a report released on June 20, the international financial crime authority urged nations to address regulatory deficiencies that are enabling illicit financial activities to flourish within the digital asset sector.

The FATF indicated that vulnerabilities in the global financial framework are being taken advantage of by nations and networks engaged in the spread of weapons of mass destruction (WMDs).

FATF Cautions on Crypto-Driven Sanctions Evasion as Threats Escalate

The recent report, titled Complex Proliferation Financing and Sanctions Evasion Schemes, reveals that numerous countries are still not meeting international benchmarks for combating this form of financing.

Only 16% of the nations evaluated by the FATF and its Global Network were deemed effective in implementing targeted financial sanctions in accordance with the United Nations Security Council’s resolutions concerning proliferation.

FATF report uncovers significant weaknesses within the global financial system in addressing the financing of weapons of mass destruction.
Illicit actors are employing increasingly advanced techniques to evade sanctions and bypass export controls.#CPF pic.twitter.com/CyZMamRwPy

— FATF (@FATFNews) June 20, 2025

The report cautions that if both public and private sectors do not act swiftly to enhance compliance, those involved in WMD programs will persist in circumventing controls.

“This represents a serious and escalating threat,” the FATF cautioned, adding that “countries must take action now or risk being exploited by entities aiming to finance catastrophic weapons.”

The report underscores how sanctioned entities are adapting their strategies. It elaborates on how these entities are establishing front companies, manipulating beneficial ownership information, and utilizing digital assets to obscure transactions.

These networks frequently depend on intermediaries to transfer funds and materials while concealing their true identities from financial institutions.

One of the most urgent issues identified is the increasing significance of virtual assets. The FATF identifies North Korea as the most active state participant in proliferation financing.

The nation’s expanding digital connectivity, coupled with a diverse array of revenue sources, has complicated detection and disruption efforts. In February 2025, the DPRK was associated with the theft of $1.5 billion in cryptocurrency from the exchange ByBit.

The FATF also observed that North Korea continues to generate revenue through overseas IT personnel and illicit activities across various sectors. These funds are being directed into its weapons development programs.

“Illicit actors are quickly adapting,” the report noted. “They are leveraging technology, exploiting legal loopholes, and taking advantage of inconsistent enforcement across jurisdictions.”

The FATF identified four primary tactics employed in sanctions evasion, which encompass intermediaries, obscured ownership, the utilization of cryptocurrency and other technologies, and manipulation of the maritime sector.

The report indicates that these tactics are often layered together to form intricate evasion networks that are challenging to trace.

FATF Issues Urgent Call for Global Coordination as Crypto Crime Surges 66% in 2024

To assist countries in their response, the FATF provided practical guidance in its report.

This includes risk indicators such as mismatched IP addresses or unusual shipping routes, along with enforcement recommendations like enhanced public-private collaboration and improved reporting of suspicious transactions.

The authority emphasized that enforcement must keep pace with the evolving threat. It also highlighted the necessity of sharing timely intelligence across borders and sectors.

The FATF stressed the urgency of a coordinated global response. It warned that without stricter controls and expedited information sharing, the misuse of digital assets for sanctions evasion will continue to escalate. The repercussions, it stated, could be severe.

“The failure to act could fuel the very programs that jeopardize global security,” the report concluded.

The FATF urged all jurisdictions to reassess their compliance frameworks, enhance oversight of crypto-related activities, and apply pressure where necessary.

The organization’s warning follows increasing concern among international regulators regarding the use of cryptocurrency by state-backed threat actors.

The expansion of the crypto industry has created opportunities for innovation as well as for fraudsters. In 2024, Americans reported losing a record $9.3 billion to crypto-related crimes, marking a 66% increase from 2023.

FBI: Americans aged 60 and older reported losing nearly $3 billion to crypto fraud last year. In total, Americans reported being defrauded of approximately $9.3 billion via crypto, out of a total of $16.6 billion in reported losses that year. pic.twitter.com/xupom9DeUn

— Molly White (@molly0xFFF) April 23, 2025

The FBI received close to 150,000 complaints, indicating that crypto fraud has become a widespread issue.

Chainalysis reported that North Korean hackers stole $1.34 billion last year, representing 61% of all stolen cryptocurrency funds.

Despite over $3 billion lost to hacks, Binance’s Financial Intelligence Unit indicates that illicit crypto activity still constitutes less than 1% of total volume.

Major schemes included ransomware, pig butchering scams costing $3.6 billion, and attacks from state-backed groups.

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