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Anchor: The U.S. Treasury released a report on Thursday that shed light on the methods North Korea engages in to exploit decentralized financing to fund its weapons of mass destruction program. The department is hoping that its findings help efforts to stymie the flow of illicit cash to the North’s nuclear and missile programs.
Tom McCarthy explains.
Report: A new report by the U.S. Department of the Treasury has assessed that North Korea is abusing “decentralized finance” services to funnel cash into its program to develop weapons of mass destruction(WMD).
The Treasury presented the assessment in a report titled “Illicit Finance Risk Assessment of Decentralized Finance” published on Thursday that analyzed the role of such services, abbreviated in the report to “DeFi,” as a means of circumventing sanctions and regulations to illegally obtain reserves.
The report attempts to inform efforts to identify and rectify the shortcomings of various controls against money laundering and terrorism financing in virtual asset protocols and services that claim to allow a degree of automated peer-to-peer transactions based on blockchain technology, often related to cryptocurrency.
The Treasury pointed out that North Korea has capitalized on the deficiencies in such controls through ransomware cybercriminals, thieves, scammers, and national cyber culprits.
The section dedicated to money laundering noted that perpetrators use DeFi services in the form of “mixers” to make digital assets less traceable, providing as a case example the obfuscated movement of 455 million dollars in assets stolen by the regime-linked Lazarus Group through the mixer Tornado Cash in 2022 in what is likely the largest virtual currency heist to date.
The report recommended that organizations like the Group of 7’s Financial Action Task Force reconsider the interpretation of its own regulations to apply the same standards to DeFi services as it does to other financial service providers, and encouraged public blockchain transparency to trace transactions.
The report attributed the growing prevalence of DeFi exploitation by the North to pressure from U.S. and UN sanctions, which has forced the regime to turn to cybercrimes, prompting the U.S. government to issue an advisory last year against inadvertently hiring North Korean IT workers and developing security against cyber attacks.
Tom McCarthy, KBS WORLD Radio News.