UK National Risk Assessment of Proliferation Financing

As a major global financial centre, a key component of the UK’s economic strength and prosperity is our openness to investment and trade. However, this quality also makes the UK economy vulnerable to illicit finance activities, including proliferation financing. Despite robust controls in place in the UK to tackle proliferation financing activity, actors involved in proliferation financing look to exploit the UK’s position in the global economy and international financial system to raise funds to develop chemical, biological, radiological, and nuclear (CBRN) programmes which counter UK national security objectives and threaten international peace and security.

On 23 September, the Government published the UK’s first national risk assessment (NRA) of proliferation financing risks. This assessment, published by HM Treasury using views and evidence from Government, the private sector, and academic and research partners, provides a comprehensive review of the proliferation financing risks facing the UK. The UK is one of the first jurisdictions to carry out an assessment of this kind.

The key findings of the UK national risk assessment of proliferation financing are:

The UK’s financial sector is at high risk from proliferation actors. It is highly likely that proliferation actors will target the UK to gain financing for CBRN proliferation despite the robust controls in place to prevent this. The UK’s financial services industry, particularly the banking and insurance sectors, is especially at risk.

The Democratic People’s Republic of Korea (DPRK) and Iran are the most significant proliferation financing actors at state level. The DPRK seeks to evade international sanctions regimes to obtain financing for its unlawful weapons of mass destruction and ballistic missile programmes, and Iran for its nuclear programme.

There is limited awareness in the private sector of proliferation financing compared to other risks, including money laundering and terrorist financing. A lack of awareness of proliferation financing in parts of the UK economy can lead to a lack of understanding of how certain industrial products, for example, may be manipulated for hostile use or for use in a CBRN programme.

Despite the above threats, the assessment highlights the robust counter-proliferation legal framework in place in the UK to protect the country from proliferation financing. The UK's autonomous financial sanctions regimes targeting CBRN proliferation, as well as UN sanctions regimes implemented in the UK, export control regimes, and other tools available to the UK Government, limit opportunities for proliferating actors to exploit the UK to obtain financing for CBRN capabilities.

The report is available on gov.uk www.gov.uk/government/publications/national-risk-assessment-of-proliferation-financing.

The national risk assessment demonstrates the UK’s ongoing commitment to counter proliferation financing, set out in the integrated review of security, defence, development, and foreign policy 2021. We also committed to publishing a proliferation financing NRA in the Government’s economic crime plan. Moreover, the UK is at the forefront of international efforts to counter proliferation financing, particularly at the Financial Action Task Force (FATF) where we have led progress on updating FATF recommendations focusing on proliferation financing.

This is the first NRA the UK has produced evaluating the threat posed by proliferation financing. Under proposed amendments to the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations (MLRs), HM Treasury will be required to review and update this NRA on a regular basis. This would offer opportunities to further refine the assessment and its methodology going forward and ensure that the UK is proactively seeking to address new threats and trends posed by proliferation financing. In this proposed amendment of the MLRs, which is currently out for public consultation until October 2021, the Treasury also plans to set requirements on relevant persons to take appropriate steps to identify and assess the risks posed by proliferation financing, and to establish strategies to mitigate and manage these risks effectively. The findings of this assessment will also provide the UK with further opportunities to develop its counter-proliferation financing policy.

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