Countering the Challenges of Proliferation Financing

The proliferation of weapons of mass destruction and advanced conventional weapons capabilities poses significant threats to global stability and national security. Proliferation financing controls are a policy tool used to prevent state and non-state actors from exploiting the international financial system for the illicit procurement of weapons and the dual-use technologies used to create them.

This report by Dr. Togzhan Kassenova and Dr. Bryan R. Early evaluates some of the fundamental challenges posed to the effective use of proliferation financing controls, analyzes trends in proliferation financing cases, and offers recommendations for improving the implementation of proliferation financing controls. The report draws on an analysis of eight national case studies, fifty different proliferation financing cases, and interviews with over three dozen experts in the field.

The report finds that the implementation of proliferation financing controls has been hampered by the ambiguous and inconsistent legal obligations that states and financial institutions have to employ the measures and the lack of a universal definition of what constitutes proliferation financing. The ways in which proliferation financing controls are siloed from the implementation of strategic trade controls and a host of pragmatic challenges faced by banks in implementing the controls also have hampered their effectiveness. The report also details distinct patterns of proliferation financing behavior in cases involving North Korea and Iran to illustrate the vulnerabilities that proliferators seek to exploit. The authors offer a series of recommendations for financial institutions and governments about how to make proliferation financing controls more effective.

This project was funded with a grant from the Smith Richardson Foundation.

About the Authors:

Dr. Bryan R. Early is a Professor of Political Science and Associate Dean for Research at the University at Albany, SUNY’s Rockefeller College of Public Affairs Policy. Dr. Early is also the founding director of the Project on International Security, Commerce, and Economic Statecraft (PISCES) and served as the Director of the Center for Policy Research from 2015-2019. He has published 35 peer-reviewed academic articles on the topics such as economic sanctions, weapons of mass destruction security issues, shadow economies, and political violence. His book Busted Sanctions: Explaining Why Economic Sanctions Fail (Stanford University Press, 2015) provides the first comprehensive explanation of how and why countries undercut economic sanctions via the trade and aid they provide to sanctioned states. Dr. Early has received over 90 grant awards totaling over $18 million, mostly on behalf of the U.S. Department of State’s Bureau for International Security and Nonproliferation and U.S. Department of Energy. Dr. Early earned his PhD from the University of Georgia in 2009.

Dr. Togzhan Kassenova is a Washington, DC-based Senior Fellow with the Center for Policy Research (CPR) at University at Albany and a Nonresident Fellow with the Nuclear Policy program at the Carnegie Endowment for International Peace. She is an expert on nuclear politics, WMD nonproliferation, and financial crime prevention. Dr. Kassenova is a leading policy expert on proliferation financing that has trained and advised numerous governments and the private sector on the subject. Over the last several years, she has led capacity-building workshops and training on the implementation of proliferation financing and nonproliferation sanctions for governments and the private sector in Southeast Asia, Central Asia, Central Europe, Latin America, and the Caribbean on behalf of CPR. Her consultancy work for UN Office on Drugs and Crime (UNODC) has included developing and delivering courses on proliferation financing for the governments of Indonesia, Thailand, Namibia, Mekong region countries, and MENAFATF. From 2011 to 2015, she served on the UN Secretary-General’s Advisory Board on Disarmament Matters. Dr. Kassenova holds an MA in Financial Integrity from Case Western Reserve University, a PhD in Politics from the University of Leeds, and is a Certified Anti-Money Laundering Specialist (CAMS). She is the author of Brazil’s Nuclear Kaleidoscope: An Evolving Identity (Carnegie Endowment for International Peace, 2014) and Atomic Steppe: How Kazakhstan Gave Up the Bomb (Stanford University Press, 2022).

About the Project on International Security & Economic Statecraft (PISCES)
The PISCES Team at the Center for Policy Research possesses world-class expertise on the topics of strategic trade controls, economic sanctions, nonproliferation, and proliferation financing. Comprised of a core team of seven experts with legal, academic, and policy backgrounds, PISCES has worked with over three dozen governments around the world on nonproliferation and economic statecraft issues. The PISCES Team has helped governments with drafting strategic trade control laws, enhancing regulations, training personnel, facilitating industry outreach, and utilizing red teaming to counter proliferation threats. PISCES team members also conduct both academic and policy research to help understand how to employ strategic trade controls and economic sanctions effectively.

Click here to download Countering the Challenges of Proliferation Financing (2023).pdf