FATF calls for global crackdown on weapons funding via crypto, fake firms by rogue states

In a scathing new report, the Financial Action Task Force (FATF) has revealed how loopholes in global finance are being weaponised to fund the world's most dangerous regimes. From North Korea’s $1.5 billion crypto heist to Iran’s oil-smuggling networks and the use of fake firms in sanctions evasion, the watchdog paints a dire picture of an international system under siege by state-sponsored illicit finance.

The FATF’s June 2025 report underscores an alarming rise in the misuse of financial channels — including cybercrime, cryptocurrency, and decentralized finance (DeFi) — to bypass international sanctions and fund weapons of mass destruction (WMD).

It identifies North Korea as the most significant actor in proliferation financing, having orchestrated the theft of $1.5 billion in cryptocurrency from ByBit alone in February 2025 to support its nuclear weapons programme.

The report highlights the use of crypto mixers, anonymity-enhancing coins, and poorly regulated virtual asset service providers (VASPs) as systemic weaknesses. These tools help state and non-state actors obscure financial trails, with DeFi platforms providing a further shield through automated, pseudonymous transactions.

In a stark revelation, the FATF details how India recently intercepted a shipment bound for Pakistan, falsely declared as industrial dryers but intended for missile programs. The case exemplifies how trade fraud and front companies are being employed to cloak illicit procurement routes.

Iran, meanwhile, continues to evade sanctions by leveraging a sprawling network of oil smugglers and proxy groups like Hezbollah. These groups exploit informal markets and financial intermediaries to channel funds into Tehran’s military and missile programs.

“Fake firms, manipulated invoices, and complex ownership structures are making enforcement almost impossible,” the FATF warned. It also flagged Russia’s deepening economic ties with North Korea as a new axis of proliferation risk, particularly following the 2024 DPRK-Russia treaty that facilitates military cooperation and financial connectivity.

The report calls for an overhaul of global regulatory coordination, urging countries to tighten rules on customer due diligence (KYC), improve sharing of suspicious activity reports (SARs), and close jurisdictional gaps. It warns that unless the international community acts swiftly, these networks will continue to exploit systemic blind spots to fund WMD ambitions.