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The report documents the unlawful military cooperation between the Democratic People’s Republic of Korea (DPRK) and the Russian Federation. This cooperation includes the transfer of various military assets, such as artillery, ballistic missiles, and combat vehicles from North Korea to Russia, and the provision of air defence systems from Russia to North Korea. These transfers, conducted via sea, air, and rail, constitute violations of United Nations Security Council resolutions. These sea routes involve shipments from North Korean to Russian ports, often using smaller vessels and transshipment points to avoid detection. Air corridors make use of non-commercial flights at night to evade radar, connecting military bases in both countries. Lastly, rail networks provide a reliable means of transporting heavy military equipment, with dedicated trains operating year-round. These methods enable continuous military cooperation, bolstering Russia’s capabilities in Ukraine and providing North Korea with advanced technology and training.

The report also mentions the training of North Korean troops by Russian forces, with over 11,000 North Korean soldiers deployed to support Russia’s military operations in Ukraine since October 2024. Furthermore, the report details significant breaches of sanctions, including the supply of refined petroleum products by Russia to North Korea, far exceeding the UNSC-mandated cap, and the maintenance of prohibited correspondent banking relations. These financial transactions support North Korea’s military programs and the development of its ballistic missile capabilities. Collectively, these sections illustrate the depth of unlawful cooperation between North Korea and Russia.

The DPRK-Russia Treaty on Comprehensive Strategic Partnership and frequent high-level exchanges indicates that the two countries intend to maintain this ongoing and intensifying cooperation. This treaty marks the significant cooperation between North Korea and Russia. This treaty has facilitated the unlawful transfer of military assets, including artillery, ballistic missiles, and air defence systems, in violation of United Nations Security Council resolutions. It has also enabled the deployment of North Korean troops to support Russia’s war efforts in Ukraine.

The report reveals significant vulnerabilities in the global financial system concerning the financing of weapons of mass destruction and sanctions evasion. Despite the grave threat posed by proliferation financing (PF), only 16% of countries assessed by the FATF have demonstrated high or substantial effectiveness in implementing targeted financial sanctions under the United Nations Security Council Resolutions on proliferation. This highlights the need for both public and private sectors to improve technical compliance and effectiveness to prevent exploitation of existing controls. The report provides a detailed analysis of evolving methods and techniques used to evade PF-related sanctions, including sourcing dual-use goods, technologies, and knowledge through procurement networks and front companies.

The report identifies four major typologies used in sanctions evasion:

1. Enlisting Intermediaries

Involves using third parties to conduct transactions or activities that would otherwise be prohibited. These intermediaries can be individuals or entities that act on behalf of the primary actors to obscure the true nature of the transactions. By doing so, they help to bypass sanctions and other regulatory controls. Intermediaries might include brokers, agents, or even unsuspecting businesses that are manipulated into facilitating these transactions. This also includes the use of front and shell companies in third countries with no activity, or else conducting legitimate-appearing transactions to access financial systems.

2. Obscuring Beneficial Ownership Information (BOI)

Involves techniques to hide the actual ownership of assets or entities are employed to gain access to financial systems. This can involve the use of shell companies, complex corporate structures, and nominee arrangements to conceal the identities of the true owners. By doing this beneficial ownership, illicit actors can avoid detection and continue their activities without raising suspicion. For example, the Democratic People’s Republic of Korea (DPRK) routinely employs deceptive practices, including obscuring BOI, in order to circumvent UN and national sanctions regimes and access the formal financial system. The DPRK continues to use foreign-based front and shell companies, covert overseas representatives, and third-party facilitators to obfuscate the true originator, beneficiary, and purpose of transactions.

3. Using Virtual Assets

Includes leveraging cryptocurrencies and other digital technologies to move funds covertly is another common method. Virtual assets provide a level of anonymity and can be transferred quickly across borders, making them attractive for those looking to evade sanctions. The report highlights the increasing use of cryptocurrencies to finance proliferation activities, as they can be harder to trace compared to traditional financial transactions. As of April 2024, three quarters of FATF Global Network countries were found to be either non-compliant or at most partially compliant with international standards on virtual assets and VASPs. As a result of this, the various shortcomings in the regulation and supervision at an international level have left the sector vulnerable to abuse by PF networks.

4. Exploiting the Maritime and Shipping Sectors

Involves making use of complex shipping routes and practices to disguise the origin and destination of goods. Techniques include ship-to-ship transfers, falsifying shipping documents, and using flags of convenience to obscure the true nature of the shipments. These methods help to evade export controls and sanctions by making it difficult to track the movement of goods. As in typology 2, illicit actors can obscure beneficial ownership information to circumvent sanctions regimes and access the formal financial system. Similarly, in the maritime sector, illicit actors can physically alter merchant vessels to pass as different vehicles and obscure their identity to conceal their true ownership and activities.

The full report is available at the following link: https://www.fatf-gafi.org/content/dam/fatf-gafi/reports/Complex-PF-Sanctions-Evasions-Schemes.pdf.coredownload.inline.pdf

The Council today renewed the EU restrictive measures in view of the Russian Federation’s continuing actions destabilising the situation in Ukraine for a further 6 months, until 31 January 2026.