Disrupting the financing of proliferation (FoP) is potentially a key tool to combat state-sponsored WMD programs. However, detecting FoP is difficult. The majority of governments and financial institutions are unclear about what FoP looks like and how to identify it, so the tool is rarely exploited. This report describes typologies of financing the proliferation of WMD to address this issue.
The most comprehensive study of FoP to date was published by the Financial Action Task Force (FATF) in 2008. This includes a list of 20 “indicators of possible proliferation financing,” including, for example, transactions connected with designated individuals or entities or with countries of proliferation concern. Since then, more information has become available, particularly related to the proliferation programs of DPRK and Iran.
Project Alpha has carried out an analysis of data relating to DPRK, Iran, Syria, Pakistan and India provided by governments and financial institutions, contained in records of judicial proceedings, UN Panel reports, and media reports. The analyses are summarized in the form of 60 case studies. They enable identification of common elements between networks set up to finance proliferation or to circumvent financial sanctions, and of ways networks may mutate in response to sanctions.
Based on the 60 cases, the indicators in the FATF 2008 Report have been modified and categorised as “potentially highly indicative,” “potentially moderately indicative” or “potentially poorly indicative” of FoP. The study identified additional possible indicators, including transactions involving individuals connected with countries of proliferation concern, the use of cash, the involvement of small trading or intermediary companies, and others. By illustrating different types of FoP, the case studies are intended to support the work of governments and financial institutions worldwide in identifying FoP. They are intended to facilitate FoP risk assessments, to support regulators in providing guidance to financial institutions and to support financial institutions in complying with sanctions or other WMD controls.
Above all, combating proliferation of WMD by identifying and disrupting the financing is most likely to be successful when governments and the private sector cooperate and coordinate in sharing information. It is hoped that the FoP case studies included in this report will help this process.