Report

North Korean crypto-to-fiat activity

This report from UK think tank RUSI offers actionable recommendations for the defence and security sector to mitigate proliferation financing risks.

This paper delivers critical insights into how North Korea exploits virtual asset-to-fiat conversion services to launder billions in stolen cryptocurrency, directly supporting its weapons of mass destruction program. By analysing the intersection of blockchain-based and traditional financial systems, the research identifies key vulnerabilities and offers actionable recommendations for the defence and security sector to mitigate proliferation financing risks.

Key Recommendations

Regulatory Guidance: Issue clear guidance on managing correspondent relationships between Virtual Asset Service Providers (VASPs), especially when interacting with unlicensed VASPs, to reduce misuse and exploitation.

Standardised Onboarding: Develop standardised questionnaires for onboarding VASPs, capturing essential information on ownership, compliance and operations, supported by an International Banking Association.

Secure Information Sharing: Establish secure channels for intelligence exchange between financial institutions, regulators and VASPs, focusing on known exchange identifiers and suspicious wallet addresses.

Payment Reference Requirements: Mandate that VASPs include specific references (such as a VASP identifier) in payment messages for bank transfers, enabling beneficiary banks to proactively identify and investigate VA-related activity.

The recommendations support stronger industry collaboration, improved detection and more robust regulatory oversight, helping to limit the regime’s access to illicit funds.