FATF Exposes Crypto’s Dark Side: How Digital Assets Fuel Weapons Programs in Sanctioned States
Crypto isn't just moon shots and memecoins—it's now the shadow financier for global pariahs. The Financial Action Task Force (FATF) drops a bombshell report revealing how sanctioned regimes exploit decentralized finance to bankroll weapons development. No SWIFT? No problem.
DeFi's dirty little secret
Privacy coins, cross-chain swaps, and anonymizing mixers have become the new offshore accounts. Regulators scramble as crypto's borderless nature cuts through sanctions like a hot knife through butter. Meanwhile, compliance costs for legit projects keep soaring—because nothing says 'financial innovation' like paying seven-figure fines.
The ultimate irony? The same tech that promised to democratize finance is now propping up authoritarian regimes. Maybe Satoshi should've coded in an ethics module.
"In plain sight"
Platforms like eXch, recently shut down for its involvement in the ByBit hack, allegedly allowed threat actors and organizations such as the Lazarus Group to "cash out funds in plain sight," O'Connor said.
The FATF’s report draws heavily on investigations from blockchain analytics firm Chainalysis, including an extensive study on how crypto transactions tie evidence to a network of Chinese fentanyl suppliers to Mexican cartels.
But beyond the report's warnings, an emerging pattern of geopolitical coordination funded by crypto has emerged, according to O'Connor.
"What’s more concerning is how these networks are starting to overlap," O'Connor told Decrypt. North Korean operatives have reportedly been “active in the Russia-Ukraine war,” with “Iranian-made drones” being used by Russian forces.
There’s also evidence that Iran and Russia have been "building joint drone factories,” O'Connor said, citing reports his team has reviewed.
Iran, which has been in conflict with Israel for almost two weeks, has relied on "militarised proxies in the Middle East as well as an array of transnational criminal organisations" to "mitigate the impact of economic sanctions," the FATF report stated.
"Crypto plays a key role in financing and sustaining this kind of coordination, quietly and at scale," O'Connor warned.
