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Out of Sight, Out of Mind? A Review of Efforts to Counter Proliferation FinanceEmil Dall, Andrea Berger and Tom Keatinge
Whitehall Reports, 20 June 2016
Centre for Financial Crime and Security Studies, Counter-Proliferation Finance, Proliferation and Nuclear Policy, Proliferation and Nuclear Policy
In 2012, the Financial Action Task Force (FATF), the international organisation responsible for co-ordinating government actions to counter financial crime, broadened its recommendations to include measures relating to countering the financing of WMD, their delivery vehicles, and related goods and activities. The move to include this subject alongside terrorist financing and money laundering was seen by many of those countries that are part of the FATF network (FATF jurisdictions) as a vital next step. National efforts to combat proliferation finance had until 2012 been highly uneven, and in many cases non-existent, despite UN Security Council resolutions which detailed related obligations. Most countries, although they had procedures in place to detect and prevent the flow of goods related to illicit WMD programmes, did not have similar procedures in place to stem the flow of funds used to facilitate this dangerous trade. Financial institutions (FIs) within FATF jurisdictions were therefore largely ignorant of the proliferation threat, unaware of the fact that they might be inadvertently involved and unclear as to what, if anything, they were expected to do to address the issue. Independent, international leadership was seen as necessary to create a standard for countering proliferation finance (CPF) that would hinder the ability of proliferators to access and exploit the formal financial sector.
Four years have now passed since the FATF incorporated recommendations on CPF into its international standards. Despite this development, extensive interviews with governments, regulators and FIs reveal that many of the shortcomings of the pre-2012 CPF landscape persist. Governmental interest in proliferation finance and related outreach to FIs remains highly uneven between national jurisdictions. The wide spectrum of approaches is reflected in the mixed messages currently passed down from governments and regulators to their FIs. Those institutions, for their part, still demonstrate poor understanding of the nature of proliferation as an activity distinct from general sanctions evasion by states such as Iran and North Korea. Confronted by mixed messages from governments regarding CPF expectations, this study similarly shows that FIs are struggling to devise their own internal approaches to mitigate relevant risks.
Erratum: A minor amendment to page 8 of this paper was made on 29 July 2016.
ABOUT THE AUTHORS
Emil Dall is a Research Analyst in the Proliferation and Nuclear Policy group at RUSI, where he works on countering proliferation finance and sanctions policy. Prior to joining RUSI, Emil worked as an Analyst for a London-based insurer and a researcher at the International Centre for Security Analysis. He holds an MA in International Peace and Security from the Department of War Studies at King’s College London and a BA in Politics from the University of Cambridge.
Andrea Berger is the Deputy Director of RUSI’s Proliferation and Nuclear Policy group and a Senior Research Fellow. She specialises in counter-proliferation and Korean Peninsula security, and co-directs RUSI’s programme on sanctions. Andrea previously worked in non-proliferation research at the International Centre for Security Analysis and as a Trade Policy Analyst for Global Affairs Canada. She is the author of Target Markets: North Korea’s Military Customers in the Sanctions Era (Taylor and Francis, 2015).
Tom Keatinge is the Director of RUSI’s Centre for Financial Crime and Security Studies. His research focuses on matters at the intersection of finance and security including sanctions, terrorist financing, human and wildlife trafficking, and the role that public–private partnerships play in tackling these issues. Prior to joining RUSI in 2014, he was an investment banker at JP Morgan for 20 years. He has a Masters in Intelligence and International Security from King’s College London.