FATF NRA - USA 2024 National Proliferation Financing (PF) Risk Assessment (NPFRA)

The 2024 National Proliferation Financing (PF) Risk Assessment (NPFRA) updates the United States’ two previous NPFRAs in line with the Financial Action Task Force’s (FATF’s) PF risk assessment guidance.

This 3^rd assessment

• Was prepared according to Sections 261 and 262 of the Countering America’s Adversaries through Sanctions Act (P.L. 115-44) as amended by Section 6506 of the Fiscal Year 2022 “National Defense Authorization Act” (P.L. 117-81).
• Identifies State-sponsored or affiliated actors continue to pose the most significant PF threat to the United States. Their WMD programs can leverage significant technical expertise to design and execute clandestine procurement and revenue-raising schemes at scale, even if they are subject to comprehensive multilateral and U.S. sanctions and export controls.
• Identifies two state actors—Russia and the DPRK—are the highest-risk threat actors and are highlighted because of the scope and sophistication of their illicit procurement and revenue-generation efforts.
• Russia’s illegal, unprovoked, and unjustified full-scale invasion of Ukraine in February 2022 cast a spotlight on its illicit procurement of a variety of goods and technologies with military applications, including delivery systems and dual-use items.
• Russia continues to utilize complex transnational networks in Türkiye, the United Arab Emirates (UAE), the PRC, and other countries, to acquire much-needed technology and equipment for its war economy.
• The DPRK continued to conduct malicious cyber activity and deploy information technology (IT) workers to, at least in part, fund its WMD capabilities. This activity included efforts to illicitly raise revenue in fiat currency and virtual assets, including hacking of VASPs and, to a lesser extent, ransomware attacks.

ALL HIGH-RISK COUNTRIES THREAT ASSESSMENT

This section identifies the PF threat actors facing the United States and summarizes significant geopolitical and security developments since the 2022 NPFRA.

RUSSIAN FEDERATION

1. Russia maintains the largest and most capable nuclear weapons stockpile in the world, as well as significant conventional capabilities, both of which it continues to expand and modernize.
2. Russia’s unlawful invasion of Ukraine is the most significant geopolitical change since the 2022 NPFRA and has raised Russia’s PF threat profile. Because of heavy battlefield losses, Russia has engaged with close partners to replenish its stocks of conventional weapons. Those losses have also increased Russia’s reliance on nuclear, cyber, and space capabilities to maintain deterrence and project power elsewhere.
3. Since February 2022, Russia has pulled back from its role or fully suspended its participation in certain international arms control and WMD mechanisms, including treaties. Russia has said it is suspending its participation in the New Strategic Arms Reduction Treaty (New START), which the United States has called legally invalid and irresponsible.
4. The United States continues to certify that Russia is in breach of its commitments to the Chemical Weapons Convention, based on Russia’s use of chemical weapons in targeted assassinations, support for the Assad regime’s use of chemical weapons, and its ongoing, undeclared offensive chemical weapons program.
5. In November 2023, Russia revoked its ratification of the Comprehensive Nuclear-Test-Ban Treaty, which prohibits any testing of nuclear explosive devices and is a cornerstone of preventing nuclear proliferation, a step condemned by the Secretary General of the United Nations as well as the United States.
6. Due in large part to the imposition of sanctions by the United States and its allies and partners, Russia faces a degraded ability to fund its defence priorities generally.
7. Based on the case studies below, Russia has prioritized overseas procurement of goods and technologies it may not be able to source directly because of multilateral sanctions pressure targeting its military-industrial complex.
8. This course of action directly implicates U.S. financial institutions and other private sector entities.
9. As demonstrated by the case studies, in some instances this is because the goods themselves are produced in the United States, and the underlying transactions are with accounts held by U.S. businesses in U.S. financial institutions. In other cases, Russia may illicitly procure goods from other jurisdictions, in which case the transaction chain touches U.S. jurisdiction through correspondent accounts with U.S. banks.
10. Russian PF networks leverage front and shell companies to place orders for needed components. These networks often then obfuscate the end-user and destination for the goods, routing shipments through third countries before they are ultimately delivered to customers in Russia. Recent U.S. designations highlight the multinational networks of illicit actors that participate in procuring goods for Russia’s military-industrial purposes.
11. Russia’s Procurement Relationship with the DPRK and Iran
12. As a direct consequence of its battlefield losses, Russia has sought out cooperative procurement relationships with other states of proliferation concern including the DPRK and Iran. These activities directly undermine the integrity of the global non-proliferation regime. With respect to the DPRK, the United States and its partners have accused Russia of violating numerous UNSCRs by procuring military equipment and munitions from Pyongyang.
13. The United States has also accused Tehran of exporting Unmanned Aerial Vehicles (UAVs) in violation of UNSCR 2231 in support of Russia’s further invasion of Ukraine, though the United States has not linked this proliferation to the use of WMD.

DPRK

14. According to the 2023 Director of National Intelligence (DNI) Annual Threat Assessment, the DPRK continued to augment its WMD capability over the review period, most publicly through the testing in 2022 and 2023 of multiple types of Intercontinental Ballistic Missiles (ICBMs), including the use of such technology to launch a military satellite.
15. According to the Intelligence Community, the Kim Jong-Un regime sees the possession of nuclear weapons as critical for its survival and to deter perceived threats from its neighbours and the United States.
16. The DNI Threat Assessment noted that the regime will increase its use of methods like cyber theft and illicit trade to raise revenue to support its strategic priorities, including its WMD program. The U.S. government has cited public estimates of the revenue the DPRK has generated through these means.
17. According to the UN Panel of Experts, the DPRK attempted to steal as much as $2 billion between 2015 and 2019 through cyber means.
18. According to private industry estimates, the DPRK stole up to $1.7 billion in virtual assets in 2022 alone. It is important to note that these are just estimates, as the nature of the activity means any figure will not incorporate all proceeds and may include revenue misattributed to DPRK-linked actors.
19. The September 2023 report of the DPRK UN Panel of Experts documents Pyongyang’s ongoing access to the international financial system through overseas banking representatives, joint ventures, cooperative entities, and illicit business activities.26 In November 2023, OFAC announced the designation of eight individuals associated with DPRK state-owned weapons exporters, financial institutions, and front companies, including the Reconnaissance General Bureau, the DPRK’s main foreign intelligence agency, and the Foreign Trade Bank (FTB), the DPRK’s primary foreign exchange bank.

RUSSIA AND THE DPRK

20. Russia and the DPRK have collaborated on arms purchases and military assistance in direct violation of United Nations Security Council Resolutions (UNSCRs). Specifically, the DPRK has provided military equipment and munitions to Russia for use in its full-scale invasion of Ukraine. The United States is concerned that, in exchange for such materiel, Moscow will provide military assistance to Pyongyang to expand its WMD program.

IRAN

21. The United States has continued to monitor Iran’s resumption of nuclear activities. According to the DNI Threat Assessment, Iran is increasing the size and enrichment level of its uranium stockpile and is conducting advanced centrifuge research and development.
22. According to the International Atomic Energy Agency (IAEA), Iran has taken steps detrimental to the implementation of the Non-Proliferation Treaty Safeguards Agreement, including the withdrawal of designations of inspectors, which negatively impacts IAEA verification activities.
23. However, the Intelligence Community assesses that Iran has not undertaken the key nuclear weapons development activities that would be necessary to produce a testable nuclear device, though its current research and development trajectory brings it closer to producing the fissile material for completing a device following a decision to do so.
24. In October 2023, the United Nations’ restrictions on Iran’s missile-related activities under UNSCR 2231 expired. The United States and partner countries remain committed to countering Iran’s procurement, development, and proliferation of missiles, UAVs, and other military weapons.
25. On October 18, 2023, the Departments of the Treasury and State jointly acted to sanction the actors involved in Tehran’s missile and conventional arms activities and issued accompanying guidance to alert persons and businesses globally to Iran’s ballistic missile procurement activities.
26. The United States also joined 46 other Proliferation Security Initiative countries in affirming their shared commitment to Iranian ballistic missile-related counterproliferation efforts, regardless of the status of UNSCR 2231.31
27. As referenced in the Russia threat section, the United States also remains focused on Iran’s acquisition, development, procurement, and proliferation of UAVs, which Tehran has provided to Russia, as well as affiliated groups in the Middle East. It has also done so to

1. Iranian-aligned militia groups in Iraq, who have used UAVs to attack US forces in Iraq and Syria, and
2. the Houthis in Yemen, who have used the weapons to conduct strikes inside Yemen and against countries in the region, including Saudi Arabia, the UAE, a likely attempt to strike targets in Israel, and against commercial shipping in the Red Sea.

PEOPLE’S REPUBLIC OF CHINA (PRC)

28. The PRC continues to pursue its goal of building a military that can protect its territory and government, make it a preeminent player in regional affairs, offset U.S. military superiority, and project power globally.
29. The PRC has clearly stated its ambition to strengthen its “strategic deterrent,” and continued throughout 2022 and 2023 to accelerate the modernization, diversification, and expansion of its nuclear forces, and develop its cyber, space, and counterspace capabilities.
30. To support its military modernization efforts, the Intelligence Community assesses that the PRC and those acting on behalf of PRC governmental entities will continue to engage in economic espionage and cyber theft to acquire technology and know-how.
31. Analysis from the Department of Defence (DOD) supports this view, pointing to “multiple U.S. criminal indictments since 2015 involving espionage by PRC nationals, naturalized U.S. citizens or permanent resident aliens from the PRC, as well as U.S. citizens, for their efforts to illegally acquire information and technology to advance [Chinese military] modernization.”

SYRIA

32. The United States and its partners continue to seek accountability for the Assad regime’s past use of chemical weapons.
33. Syria’s capabilities have been built in part on illicit procurement and fundraising which, in the past, transited the U.S. financial system. This assessment does not include any case studies that demonstrate this activity during the review period, but U.S. financial institutions and other private sector entities should remain vigilant of the sanctions and export control risk arising from the activities of the Syrian government.

PAKISTAN

34. In testimony for the 2022 DNI Annual Threat Assessment, the Director of the Defence Intelligence Agency noted that Pakistan will continue to perceive nuclear weapons as key to its national survival in the face of neighbouring India’s nuclear arsenal and conventional force superiority. To this end, Pakistan has continued its ballistic missile development. In October 2023, the United States, for the first time, imposed blocking sanctions under E.O. 13382 on three PRC-based suppliers to Pakistan’s ballistic missile program.
35. While the PRC remains a key defence partner for Pakistan, individuals and entities acting on behalf of Pakistan have engaged in illicit procurement for specific U.S.-origin goods, violating relevant U.S. export control laws and where the underlying transactions have passed through U.S. financial institutions.

NON-STATE ACTORS

36. The 2018 and 2022 NPFRAs noted that the United States remains concerned about the efforts of terrorist groups and other non-state actors to acquire WMD capabilities. In November 2022, with significant support from the United States and like-minded countries, the UN Security Council renewed the mandate for UNSCR 1540, focusing on preventing the proliferation of WMDs, knowledge, or precursor material to non-state actors.
37. In March 2023, the United States released a National Security Memorandum (NSM) on WMD Terrorism and Advance Nuclear and Radioactive Material Security.
38. The NSM seeks to provide a framework to prevent non-state actors from acquiring WMD and related materials. To date, we have not assessed that those efforts have involved exploitation of the U.S. financial system, placing those activities outside the scope of this assessment.

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https://home.treasury.gov/system/files/136/2024-National-Proliferation-Financing-Risk-Assessment.pdf