2024 National Proliferation Financing Risk Assessment

The U.S. Department of the Treasury published the 2024 National Proliferation Financing Risk Assessment in February 2024 providing an in-depth analysis of the threats and vulnerabilities related to proliferation financing (PF) and highlighting key countries and non-state actors working to gain access to weapons of mass destruction (WMDs) and their components and to conventional restricted weapons and technologies. The report assesses that the U.S. financial system’s size, the dominance of the U.S. dollar, and the role of U.S. manufacturers in producing military-related technology make it a target for exploitation by proliferation financing networks. While there is a strong culture of compliance with U.S. law among financial institutions and other private-sector actors, gaps remain, necessitating ongoing efforts to improve counterproliferation financing programs. 

PF networks, often operating at the direction of state actors like Russia, the Democratic People’s Republic of Korea (DPRK), and Iran continue to exploit the U.S. financial system and private sector to finance WMD proliferation. The Treasury assessment highlights both Russia and the DPRK as an increased risk owing to the scope and sophistication of their illicit procurement and revenue-generation efforts for WMD capabilities. 

State and Non-State Actors’ Response to Threats 

Based on a review of the relevant data since 2022, Russia and the DPRK are the highest-risk threat actors, according to the Treasury. Iran, China, Syria, Pakistan, and non-state actors also pose significant risks in terms of proliferation financing, either through direct involvement in WMD programs or by supporting illicit procurement activities. The report emphasizes the persistent dangers posed by state actors and their networks in financing WMD proliferation, highlighting the ongoing need for vigilance, compliance efforts, and international collaboration to effectively tackle these threats. 

• Russia: Despite possessing a substantial nuclear and conventional military capability that it has been working to modernize, Russia’s invasion of Ukraine has heightened concerns about its proliferation financing activities. This includes seeking weapons replenishment through international partnerships and using front companies for procurement, potentially from the DPRK and Iran, which could undermine global nonproliferation efforts. 
• DPRK: The DPRK continues to enhance its WMD capabilities, as the regime views nuclear weapons as crucial for its survival and deterrence. Its use of cyber theft and illicit trade to fund its WMD program has raised alarms, with estimates indicating significant revenue acquired through these illicit means. Recent OFAC designations targeting entities linked to DPRK’s weapons exports and financial institutions further highlight these concerns. 
• Iran: The United States is closely monitoring Iran’s nuclear activities, and Iran has not yet pursued key nuclear weapons development. However, ongoing concerns exist regarding Iran’s nuclear program, leading to joint actions with partners to counter Tehran’s procurement efforts, especially concerning missiles, unmanned aerial systems (UAS), and other weapons. Iran’s provision of UAS to groups in the Middle East also raises proliferation concerns. 
• China, Syria, and Pakistan: China is actively pursuing military modernization to protect its interests, enhance regional influence, and counter U.S. military dominance, focusing on nuclear, cyber, space, and counterspace capabilities. The report assesses that China engages in economic espionage and cyber theft to acquire technology. In other regions, efforts to hold Syria accountable for chemical weapon use continue, while Pakistan prioritizes nuclear weapons development amid regional security concerns, leading to U.S. sanctions on China-based suppliers involved in Pakistan’s missile program. 
• Non-state Actors: Preventing terrorist groups and non-state actors from acquiring WMDs remains a priority for the United States and its allies, which is evident in actions like renewing UNSCR 1540’s mandate obliging UN member states to develop and enforce appropriate legal and regulatory measures against the proliferation of WMD, and releasing a National Security Memorandum on WMD terrorism prevention. The Memorandum discusses systematic methods to prevent non-state actors from using chemical, biological, radiological, and nuclear weapons. Treasury has not assessed whether non-state actors exploit the U.S. financial system to acquire WMDs. 

Economic Factors 

The economic factors related to the U.S. financial system’s structure and accessibility make it a prime target for proliferators seeking to fund their WMD programs through illicit means, according to the Treasury assessment. The size, sophistication, stability, and openness of the U.S. financial system make it vulnerable to misuse by illicit proliferation networks. 

1. The U.S. financial sector provides access to a wide range of financial services, which can be exploited by proliferators to raise, store, move, and use funds for illicit activities. 
2. Proliferators may seek access to the international and U.S. financial system to disguise their payments for goods and services or to raise funds to evade sanctions and support WMD programs. They often falsify business ownership information, obfuscate the end-users/end-use of sensitive goods and technologies and ultimate destination of shipments, and use shell and front companies to illegally acquire goods or transship them to third countries for diversion.  
3. The financial sector’s role in providing financial services to private sector actors, including banks in foreign countries through correspondent banking and other relationships, creates opportunities for proliferators to exploit these connections for their illicit financing activities. 

Legal and Regulatory Factors  

Legal and regulatory factors play a crucial role in shaping the risk landscape of proliferation financing by setting standards, requirements, and mechanisms for monitoring and preventing illicit financial activities related to WMD proliferation. 

1. The United States maintains a robust legal regime for AML/CFT/CPF, sanctions, and export controls. All natural and legal U.S. persons must comply with OFAC and State Department sanctions, as well as Department of Commerce export control regulations. 
2. U.S. financial institutions and entities with AML program requirements must mitigate proliferation financing risk through the appropriate implementation of compliance requirements, including customer due diligence, transaction monitoring, and the filing of suspicious activity reports (SARs). 
3. Gaps in the U.S. AML/CFT/CPF framework have been identified in previous assessments, which have contributed to the ability of proliferation networks to conduct their activities. Efforts have been made to address these gaps through new legislation, regulations, and guidance to enhance the effectiveness of compliance with sanctions and controls.  
4. Beneficial ownership is a key concern, as proliferation networks often create murky legal entities with unclear ownership and control structures to obscure financial activities linked to states of proliferation concern. The Corporate Transparency Act (CTA) was enacted to establish a legal framework for reporting beneficial ownership information to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN), aiming to enhance transparency and combat illicit financial activities. 

Emerging Trends 

The United States has a robust legislative and regulatory framework to combat proliferation financing, given the ongoing threats posed by WMD proliferators and their networks. These threats include the acquisition of dual-use technology, revenue-raising efforts targeting U.S. entities, and new trends such as the use of cryptocurrencies as alternatives to the U.S. dollar in global trade. The United States will continue targeting PF procurement networks, while also addressing challenges such as sanctions evasion, state complicity, new payment infrastructure, and emerging technologies that could be misused for proliferation activities. 

Structural vulnerabilities in the U.S. financial system and the centrality of the U.S. dollar in global trade continue to make the country a target for PF exploitation, although compliance efforts by financial institutions have been mitigating these risks. Strengthening the U.S. counter-proliferation finance regime is key to preventing WMD-related threats.