The Financial Action Task Force (FATF) published a report to warn that several jurisdictions are failing to fully implement and enforce targeted financial sanctions, particularly those related to terrorist financing and proliferation.

Specifically, the report identifies significant shortcomings in interagency coordination, legal frameworks, and risk-based supervision that hinder effective asset freezes and the detection of designated persons or entities.

FATF observed that most countries are not sufficiently proactive in identifying sanction targets or monitoring compliance across their financial and non-financial sectors. Some states rely too heavily on automated screening tools and fail to perform adequate verification, allowing sanctioned parties to exploit regulatory blind spots. The report especially flagged cryptocurrencies as a growing conduit for sanctions evasion due to the sector’s weak regulatory controls and cross-border nature.

The watchdog underscored that effective sanctions enforcement depends on rapid implementation of designations, robust identification of beneficial ownership, and sustained outreach to gatekeepers such as banks, lawyers, and real estate agents. However, the report points out that jurisdictions lack the legal authority or operational capacity to compel immediate compliance or gather granular data.

FATF also cited challenges posed by opaque corporate structures, including shell companies and trusts, which continue to shield sanctioned actors from scrutiny. Accordingly, the report calls for enhanced information-sharing between financial intelligence units, law enforcement, and supervisors, alongside tighter requirements for transparency in company registries.

View the relevant Report here