The Financial Action Task (FATF) has recently released two powerful publications - a report on Proliferation Financing and Sanctions Evasion (20 June 2025) and a Comprehensive Update on Terrorist Financing Risks (8 July 2025).
Together, these reports deliver a clear and urgent message: the global financial system is being exploited by increasingly sophisticated actors, often employing overlapping evasion methods.
Facts Emphasising Urgency
- Significant Implementation Gaps: A critical concern is that only 16% of FATF member countries have fully implemented key obligations related to the prevention of Proliferation Financing, exposing to significant global blind spots.
- North Korea's Deceptive Access: North Korea continues to leverage unconventional exports, such as false eyelashes, wigs, and beauty products, enabling the country to access the global financial system through undetected channels for illicit purposes.
- Heightened Geopolitical Risk: In 2024, Russia signed a formal agreement with North Korea, raising concerns about potential collaboration in evading international sanctions.
- Persistent Threat from Proliferation: North Korea's continued military expansion is underscored by its 11th intercontinental ballistic missile (ICBM) launch since 2021, with the latest reaching an altitude of 7,000 km and travelling over 1,000 km.
Top Three Evasion Typologies Firms Must Address
The FATF reports detail evolving methods criminals use to exploit the financial system. Firms must strengthen their defences against these key typologies:
1. Obscured Beneficial Ownership
Sanctioned or terrorist organisations persistently conceal their true ownership through complex structures, nominee directors, and offshore trusts. The FATF’s two reports reinforce that fundamental weaknesses in beneficial ownership (BO) transparency remain a critical enabler of Proliferation Financing.
What firms can do
- Conduct rigorous assessments of the complexity of ownership during onboarding, with particular scrutiny for entities linked to higher-risk geographies or sectors.
- Apply enhanced due diligence (EDD) where ownership opacity is high. This includes verifying BO information through multiple reliable sources and refreshing this information regularly.
- Thoroughly review the efficacy of internal screening tools to ensure they can identify indirect ownership (e.g., 50% ownership threshold for sanctions).
2. Maritime Manipulation and Front Companies
Shipping networks are still a popular route for sanctions evasion. Sophisticated tactics include disabling Automatic Identification System (AIS), altering vessel documentation, and establishing shell companies to disguise actual ownership and control.
What firms can do
- For any trade finance or maritime exposure, proactively screen International Maritime Organization Database (IMO) numbers and utilise AIS tracking tools to identify potential red flags.
- Implement robust validation processes for changes in ship ownership or typical routes, particularly those involving high-risk regions or sanctioned jurisdictions.
- Enhance monitoring for patterns indicative of layering intermediaries or unusual payment structures that deviate from standard trade finance practices.
3. Virtual Assets and Cyber Theft
Virtual assets have become a significant concern, now central to the funding of proliferation financing. The FATF reports that over $3 billion has been stolen by actors linked to North Korea through cryptocurrency exchanges alone. Terrorist groups are rapidly adopting similar tactics, including the use of privacy coins, unregulated exchanges, and decentralised mixers to obfuscate financial flows.
What Firms Should Do
- Implement screening for crypto wallets and counterparties at onboarding and throughout the entire client relationship.
- Monitor transaction patterns, looking for activity indicative of mixing services, substantial withdrawals, or exposure to high-risk jurisdictions.
- Provide continuous and specialised training to staff to identify the financial crime risks specific to virtual assets, including emerging typologies.
Rising Terrorist Financing Threats – What Firms Need to Know
The July 2025 FATF report highlights that ISIL, Al-Qaeda, and their affiliates continue to exploit financial loopholes in the following ways:
- Abuse of non-profit organisations (NPOs) and charities, leveraged as fronts for illicit fundraising and fund movement.
- Exploitation of weak oversight and strategic conflict zones and unregulated sectors, where financial oversight is weaker, making detection challenging.
- Receiving funds through diverse channels, including hawala networks, trade routes, and digital fundraising platforms.
What Firms Should Do
- Conduct rigorous source of funds checks for all activities linked to NPOs in high-risk regions.
- Implement behaviour-based monitoring systems to detect unusual patterns, such as low value payments linked to NPOs in high-risk areas.
- Map and monitor financial flows involving unstable jurisdictions or corridors that have been flagged by the FATF for Terrorist Financing risks.
How Thistle Initiatives Can Help
At Thistle Initiatives, we support firms in developing and improving their proportional and practical financial crime frameworks that are tailored to their specific client base. Whether you are reassessing controls, reviewing screening processes, or providing training to front-line staff, we are here to help. Contact our financial crime team to learn how we can assist your firm in confidently addressing the latest financial crime threats.
If you'd like to read more about the sanctions landscape, our Financial Crime Partner, Jessica Cath, has summarised a recent exclusive roundtable dinner, where Thistle Initiatives convened financial crime and sanctions experts from across the industry at the Tower of London. Read all the insights here.
Meet the Experts
Eva Koreskova, Senior Consultant 
Eva brings over seven years of experience in financial crime management, regulatory compliance, and risk assessment. Previously, she led financial crime initiatives at an asset financing firm, where she presented insights to senior leadership and implemented robust control measures across the organisation. Eva’s background also includes roles at a bank and a brokerage firm, where she drove compliance initiatives, managed high-risk clients, and advanced financial crime systems and controls.