FATF Warns of Proliferation Financing Risk from North Korea

Seoul, South Korea - The Financial Action Task Force (FATF) has sounded the alarm over the growing threat of proliferation financing emanating from the Democratic People’s Republic of Korea (DPRK).

The FATF has emphasized the need for robust implementation of its standards to disrupt Pyongyang’s illicit financial activities. This warning comes as the United Nations Security Council (UNSC) has recently passed several resolutions imposing strict financial restrictions on the DPRK.

Threat Posed by North Korea’s Illicit Activities

• The FATF is urging its member states and all jurisdictions to effectively implement relevant international standards and UNSC Resolutions to address the threat posed by North Korea’s illicit activities related to weapons of mass destruction (WMD).
• Countries must take concrete steps to counter the proliferation financing risk, including robustly implementing targeted financial sanctions against individuals and entities without delay.
• The organization is also calling for cooperation between relevant authorities on developing policies and activities to combat proliferation financing and sharing relevant information.

North Korea’s Illicit Financial Activities

• According to the FATF, North Korea frequently uses front companies, shell companies, joint ventures, and complex ownership structures to evade sanctions.
• Mechanisms must be put in place to prevent the evasion of sanctions and ensure that financial institutions and designated non-financial businesses and professions (DNFBPs) receive guidance and specific feedback from relevant competent authorities.

UNSC Resolutions and Compliance

• The UNSC has passed several resolutions related to North Korea, including restrictions on the opening and operation of new branches, subsidiaries, and representative offices of DPRK banks.
• Prohibitions on correspondent banking relationships with DPRK banks have also been imposed.
• The FATF is urging all jurisdictions to comply with these provisions and take steps to limit the number of bank accounts held by DPRK diplomatic missions and consular posts.

History of Warnings

• The FATF has been warning about the proliferation financing risk from North Korea for six years, calling upon its members and all jurisdictions to apply effective countermeasures to protect their financial systems.