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Illicit finance and national security

Illicit finance can be used by adversarial actors to conduct a range of hostile activities, such as interfering in another country’s political system, evading sanctions, funding armed operations or laundering tarnished reputations. Financial secrecy undermines a country’s ability to pursue a coherent security and foreign policy strategy. The lack of beneficial ownership transparency, the under-regulation of political finance, as well as the limited enforcement and prevention of financial crime help facilitate illicit financial flows that weaken national security. Policy responses to curb these illicit financial flows will have to start by addressing the gaps that are exploited by adversarial actors. This could include reforms that: strengthen beneficial ownership transparency, enhance the capacities of financial crime authorities, better regulate activities of foreign lobbyists, and create more substantive restrictions on political financing.

5 December 2021
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Main points

  • The use of illicit finance to conduct hostile activities can be thought of as a hybrid threat.
  • Illicit finance is used as part of foreign influence operations, targeting both politicians and more grassroots-level actors.
  • Adversarial actors can exploit vulnerabilities in poorly regulated financial systems to finance more openly hostile activities, such as the proliferation of weapons, violent extremism, armed operations and organised crime.
  • Efforts to counter the use of illicit finance by hostile interests will have to begin at home.
  • Potential policy responses include legislation that improves beneficial ownership transparency and the transparency of political financing.

Cite this publication


Bak, M.; (2021) Illicit finance and national security. Bergen: U4 Anti-Corruption Resource Centre, Chr. Michelsen Institute (U4 Helpdesk Answer 2021:23)

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Mathias Bak

Disclaimer


All views in this text are the author(s)’, and may differ from the U4 partner agencies’ policies.

This work is licenced under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International licence (CC BY-NC-ND 4.0)

Keywords


political corruption, illicit financial flows