Qatar’s partnership with the United States on CFT has improved markedly in recent years, with achievements that both countries can tout. Qatar has been part of the Terrorist Financing Targeting Center—a counter-illicit finance organization made up of the United States and six Gulf countries—since the center’s inception, designating financiers and facilitators associated with a host of terrorist organizations. Qatari authorities also took coordinated action with the United States in 2021 against a Hezbollah financing network—no small feat for a country that shares the world’s largest gas field with Iran.

Yet that CFT track record remains spotty. Qatar has hosted Hamas officials, including Khaled Mashal, for over a decade and allegedly failed to stop the Taliban from profiting handsomely from World Cup construction projects. The country has faced criticism for years that it creates a permissive environment for terrorists to store, use, and move funds.

The strength of any country’s CFT regime depends on both technical capacity and willingness. Despite its small size, Qatar has improved its technical capacity in recent years to work alongside the United States and others to identify and disrupt illicit finance. In 2019, for instance, Qatar passed a necessary overhaul of its anti-money laundering and CFT framework, bringing the country’s regime in line with international standards. But Qatar’s fiercely independent foreign policy, which the United States has at times used to its advantage, puts its willingness to cooperate into question at times.

Qatar’s hedging isn’t purely opportunistic, however. It’s partly a survival tactic. Wedged between Saudi Arabia and Iran, with a population smaller than most US cities, Qatar must maintain relationships with actors across the ideological spectrum to preserve its independence and strategic autonomy.

The same positioning that makes Qatar an imperfect partner on CFT and sanctions also makes it uniquely valuable as a diplomatic intermediary and strategic ally. Qatar hosts Al Udeid Air Base, the largest US military installation in the Middle East and a critical hub for US operations across the region. The country is clearly important for US security interests despite its complex diplomatic balancing act. Qatar also has facilitated Taliban negotiations that led to the US withdrawal from Afghanistan, hosted preliminary talks between the United States and Iran, mediated prisoner exchanges involving American hostages, and provided crucial back-channel communication with groups and countries that Washington cannot or does not want to engage directly.

This reality forces US policymakers to confront an uncomfortable strategic question: Is more consistent CFT cooperation worth losing one of the United States’ few channels to adversaries such as Iran and nonstate actors? The answer is likely no, but not at any cost.

The challenge for Washington is how to structure its partnership to maximize Qatar’s diplomatic utility while minimizing the impact on the United States’ highest priority CFT and sanctions concerns. Qatar made its name on the world stage precisely by being a platform for sensitive mediations and back-channel conversations with the United States’ most difficult adversaries. If Washington wants to preserve this unique asset to help navigate the most intractable foreign policy challenges, it may need to accept the tradeoffs that come with Qatar’s carefully calibrated independence. Tolerating permissiveness on CFT in exchange for diplomatic utility may be a bargain the United States is willing to strike when it comes to Qatar.

But US policymakers should also use this moment to reevaluate whether the current balance is serving the country’s foreign policy interests—and more clearly define and communicate CFT redlines for the United States, particularly related to groups such as Hamas. That will require meaningful thought as to what those redlines should be, or the United States risks continued ambiguity that has allowed Hamas’s Doha-based leadership to enrich itself. The United States should not be shy in making its expectations clear, especially considering the precarious Gaza ceasefire in place. While Qatar has made progress addressing some illicit finance risks, more could be done to push Qatari authorities to institute tighter controls to prevent money from being siphoned off for Hamas activities, increase investigations—with US cooperation—into the sources of Hamas funding, and limit the group’s ability to operate freely in Doha without repercussions.

Lesley Chavkin is a nonresident senior fellow at the Atlantic Council’s Economic Statecraft Initiative and currently works at Ribbit Capital.

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The reasons for the recent downturn 

The downward trend began three years ago—before the Trump administration took office. In September 2022, at his first United Nations General Assembly speech, Petro condemned the anti-drug efforts that have been a cornerstone of bilateral ties. This began a period of tensions between the two historically stalwart allies in which relations deteriorated further. During an April 2023 Capitol Hill visit, for example, Petro got into tense exchanges with US members of Congress Mario Diaz-Balart (R-FL) and Maria Elvira Salazar (R-FL). 

And now, in the past month, tensions have come to a head. On September 15, the United States decertified Colombia as cooperating to fight drug trafficking – although it did grant a national interest waiver to maintain aid and security cooperation. Several days later, Petro took to the streets of New York City during the United Nations General Assembly to call for the US military to disobey the US president. And thus, for the first time in thirty years, the US State Department revoked the visa of the Colombian president. Add to that the latest Trump-Petro exchanges, which sprung from the US strikes on boats in the Caribbean. The background here: Petro accused the US government of “murder,” saying a wayward Colombian fisherman was killed in an airstrike, and Trump responded by calling Petro an “illegal drug dealer” as he revoked US aid to the country. Both parties are at a new low that would have been unimaginable at any point since bilateral ties were strengthened in 2000 with the launch of Plan Colombia. 

The longer-term story of cooperation 

In fact, the US-Colombia partnership has historically been more than just a bilateral relationship. In 2022, to celebrate two hundred years of US-Colombia diplomatic ties, the Atlantic Council’s Adrienne Arsht Latin America Center commissioned a series of essays and released a book titled Allies. In it, Kiron Skinner, who served at the US Department of State as the director for policy planning in the first Trump administration, wrote that Colombia had become “an indispensable security partner to the US, training police and prosecutors in Latin America and other regions.” That essay went on to acknowledge that “US intelligence and security cooperation with Colombia bore positive results for both countries over the past two decades.”

That cooperation—built over decades—is what should define the relationship. Intelligence sharing has led to the disruption of illicit trafficking routes, the dismantling of armed groups, and the strengthening of operational ties that have borne fruit in Colombia and in broader US efforts to impede narcotics smuggling.

China is another concern. In Allies, then Senator Roy Blunt (R-MO) wrote: “Colombia will be an excellent partner in countering the influence of our competitors. Chief among these competitors is China.” Two years later, Colombia, in another about-face from longstanding policy, joined the Belt and Road Initiative. And in August, Colombia signed an agreement with China to even further advance bilateral cooperation.

The trade and investment ties at stake

Petro’s pullback from the United States may be politically beneficial with some limited sectors in Colombia, but Colombians still see the United States as their principal ally, even though their preference for the United States has dropped. And that US preference is also seen among Colombia’s businesses—and the US businesses that export to Colombia. Strong people-to-people ties define the relationship as well as strong commercial ties.

Perhaps most notable in the commercial sphere is that the United States has a trade surplus with Colombia, and trade has continued to deepen. Since the US-Colombia Trade Promotion Agreement entered into force in 2012, Colombia’s exports of crude oil, coffee, flowers, avocados, bananas, apparel, and light manufacturing have increased to maximize favored tariff preferences. Likewise, US agricultural exports to Colombia have surged, hitting nearly five billion dollars in 2024—up over 20 percent from the previous year and the highest increase among the top twenty-five export markets for US agriculture. Two-way trade supports people and businesses in both countries.

Colombia has, for instance, become the fifth largest destination for US yellow corn in the world and the largest in South America, accounting for more than one billion dollars per year. This is all thanks to the benefits of the current bilateral free trade agreement. In terms of investment, the United States is the top source of foreign direct investment into Colombia, with an average of $2.5 billion going into the country each year since the free trade agreement started back in 2012. A deteriorating relationship between Washington and Bogotá could put this trade at risk.

Amid this accelerating decline in bilateral ties, both sides should remind themselves of the historical importance of this relationship in security, commercial, and broader geopolitical terms. That is ultimately what led to decades of bipartisan support for the relationship in the United States. As Colombia gears up for presidential elections in 2026, resurrecting a stronger bilateral relationship will be a top foreign policy issue across campaigns. Rightfully so. This is a relationship that cannot be lost. There’s way too much at stake.  

Jason Marczak is vice president and senior director at the Atlantic Council’s Adrienne Arsht Latin America Center.

The post With Petro and Trump at odds, what’s next for the US-Colombia relationship?  appeared first on Atlantic Council.

This month, US officials—from the US secretary of state to the Treasury undersecretary for terrorism and financial intelligence—have visited Mexico, talking with officials there about tackling cartels and other transnational criminal organizations. 

These trips took place amid US President Donald Trump’s broader campaign to eliminate criminal organizations. But such a task is challenging. Transnational criminal organizations, in addition to smaller cartels, have become deeply embedded in Mexico’s society. 

In Mexico, these organizations have access to one of the most diverse criminal market landscapes in the world. Their presence has become an accepted part of society and an expected cost of conducting business in many areas, which enables them to act more brazenly and openly. Additionally, these organizations have extended their influence in public institutions, weakening the ability of these institutions to serve citizens effectively. Such factors have led the Global Organized Crime Index to place Mexico as the third-highest among 193 countries in terms of criminality. 

Countering these groups will take far more than fighting them with security forces; Mexican officials will need to restore trust across institutions and ensure they remain resilient to illicit influence. 

Criminal organizations in Mexico operate openly and with impunity. In 2022, a Mexican government agency estimated that 4.7 million extortion attempts occurred. A separate victimization study showed that in 2023, 15 percent of businesses were extorted in person, but 67 percent of the businesses extorted in person paid up. Despite the reduced level of success in receiving payment, approximately 85 percent of attempts took place remotely.  

The same government agency also estimated that 97 percent of extortion attempts in Mexico were not reported to the police in 2023. Businesses, from small farming operations to large corporations, have seemingly acknowledged and accepted extortion as a cost of doing business. In 2024, the parent company of convenience stores in Nuevo Laredo temporarily closed its 198 shops and gas stations due to gang violence that impacted its employees; in doing so, the company acknowledged that it had long had to deal with demands from cartels, such as where the stores sourced their fuel from.

Part of the challenge of responding to criminal groups in Mexico is the sheer number of them and the overlapping activities in which they are involved. For example, Mexico has become a hub for human trafficking, with multiple criminal organizations involved. A Belisario Domínguez Institute report estimated that forty-seven different criminal groups were involved in human trafficking in Mexico, making it especially difficult for reputable law enforcement agencies to respond. Nonprofit organization Consejo Ciudadano received 2,541 reports of human trafficking from 2021 to 2022, and the Mexican government’s data, while much lower than Consejo Ciudadano’s figures, shows a rise in reports from 2022 onward. Additionally, these trafficking operations stretch far and wide around the globe: Victims of Mexican origin were found internationally in the United States, Canada, Spain, Egypt, Russia, and India, as well as throughout Central and South America. Such reach makes it difficult to respond to criminal groups and their operations. 

Other criminal markets in Mexico often mirror the complex web and vast resources seen in this human trafficking problem, making it more challenging for local security elements to protect their communities, especially when multiple criminal markets converge. 

Estimates of cartel membership suggest that such groups would rank as the fourth-largest employer compared to public companies in Mexico. This number signifies not just the scale of criminal involvement in the country but also groups’ ability to control elements typically more insulated from corruption.   

The high number of employees, as shown in the graph, helps cartels continue their activities and maintain their leverage in public institutions by ensuring sympathetic candidates are elected through both voting and violence. México Evalúa reported that between 2021 and 2024, there was a 270 percent increase in the number of victims of political violence and a 356 percent increase in murders associated with political violence.  

Another reason it is difficult to respond to transnational criminal organizations is that some of them have a global reach. One such organization is the Jalisco New Generation Cartel. Its supply chains and subsidiaries (not just its markets) span the globe.  

Partners or subsidiary organizations located around the world facilitate everything from money laundering to the refinement of drugs, from real estate investment to illegal mining, ensuring a diversification of profit flows and complicating law-enforcement actions. As fiercely competitive organizations expand globally, countries seen as both markets and facilitators face an increasing risk of internal nonstate war, a level of violence familiar to Mexico. 

For more than fifteen years, aid to Mexico has typically been designated for strengthening the rule of law and countering criminal organizations, with questionable effectiveness. Most recently, the United States and Mexico’s 2021 Bicentennial Framework expanded the countries’ cooperation on these efforts and recognized that criminal organizations posed a problem to both countries. However, the US Government Accountability Office, in its 2023 review of this assistance, noted that there were no specifics regarding projects were being funded and identified to meet which goals, no outlined milestones to indicate success or improvement, and no monitoring or evaluation of programs to determine if the aid was being used successfully. Due to these missing elements, the Government Accountability Office argued that determining whether US assistance was achieving Washington’s goals is impossible. 

Cartels and transnational criminal organizations have permeated every level of Mexican society, and military action alone cannot address this. Rather, a whole-of-government approach is the only viable solution to repairing trust and recalibrating the understanding of normalcy among citizens.  

Yet, based on the sheer size and pervasiveness of these organizations, as well as their international reach, it is unlikely that Mexico will be able to dismantle these organizations unilaterally. International coalitions are necessary for the security of Mexico and neighboring and impacted countries. But without clear accountability mechanisms and metrics of success, coalitions will fall short of their aims, lose support, and further entrench the crisis. 

Aaron Kolleda is a major in the US Army and was a visiting fellow at the Atlantic Council’s Adrienne Arsht Latin America Center.

The views in this article are the author’s own and do not reflect the position of the US Department of Defense or the US Department of the Army.

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In Latin America, transnational criminal organizations, such as drug cartels, have evolved.

Backed by networks of economic activity, these groups have grown from local and regional gangs to multinational empires. Today, criminal organizations have economic and security resources that rival what some nations have—but without the same constraints and limitations. Thus, any policy intended to improve the Western Hemisphere’s security must include measures that target the increasing economic power of criminal organizations.

But where exactly is this economic power coming from—and how can countries interfere? Here’s a breakdown of the numbers that show the reach, power, and influence of these criminal organizations, with a focus on Colombia, seeing as the growth of these criminal organizations there serves as a warning to other countries in the region.

Colombia’s coca economy offers criminal groups one major source of profit and economic power. The United Nations Office on Drugs and Crime estimated that cocaine can fetch $69,000 per kilogram at wholesale prices in the United States, meaning that Colombia’s production capacity could rake in $183 billion. Colombia’s cocaine production exceeds 70 percent of the world’s overall production; if Colombia’s illicit cocaine industry were a country, it would be ranked fifty-seventh by gross domestic product, placed just below Ukraine. Cocaine supply routes are too well-resourced for Colombian authorities to stop the movement of cocaine from the country. Enforcement agencies are reporting increases in the seizure of cocaine, which helps them appear more effective; however, the overall increase in cocaine production has helped transnational criminal organizations avoid significant impacts from these seizures.

Illegal gold mining in Colombia also offers criminal groups the financing they need. In Colombia, there was a nearly twelve metric ton disparity between legally mined gold and gold exports in 2024. Based on an estimated price of $2,389 per ounce last year, this amounts to a $918 million disparity. And this criminal market is not isolated from its legal counterpart; it actually benefits from the systems set up by legal gold trade, as illegal mining operators sell via legal exporters, disguising the source’s origin with false documentation. These activities can have much more than just security consequences: They also can have environmental ramifications, for example, if such illegal mining poisons water sources. That poses an additional cost for the government and surrounding communities to bear.

Criminal organizations, with their rising economic power and influence, are growing more appealing to Colombian youth, who are especially vulnerable to recruitment. Weakening societal structures, limited economic opportunities, and the pervasive presence of criminal organizations enable this recruitment. According to a study by the United Nations Children’s Fund and the Colombian Institute of Family Welfare, several trends were common among recruits to transnational criminal organizations:

• 78 percent of minors experienced familial violence.
• 56 percent of minors had a family member in an “armed group.”
• 69 percent of minors came from low-income and rural families.
• 89 percent of minors were from regions where armed conflict was already prevalent.
• Recruited youth were on average thirteen to fourteen years old.
• Most recruitment takes place through incentives, and over 80 percent chose to work for the organization.

Criminal markets do not respect national borders

Due to the structure of transnational criminal organizations, when a single government increases its focus on countering a criminal market, the organizations shift toward countries with more permissive governments. These maps show the countries that share criminal markets with Colombia. Colombia’s efforts to restrict these criminal markets may lead to an osmosis of criminal activity across borders—if the countries that are part of the criminal market do not pursue a unified approach. This means that if one country sees a decline in illicit trade, its neighbors will likely experience an uptick. But as countries relax policies following a reduction in criminal activity within their own borders, the movement of criminal organizations can become cyclical.

Most US aid to Colombia has been designed to support security and counternarcotics. Even development assistance and economic support funds, which can be used in a variety of ways, are intended to help the Colombian government improve economic mobility and expand opportunities for Colombians—that is a necessary element in countering recruitment pressures. However, recent reductions in US aid could erode the Colombian government’s ability to directly counter criminal organizations and their recruiting practices.

Still, by working more closely with regional partners and by taking a holistic approach—simultaneously targeting the criminal organizations’ resources, their recruitment pipelines, and the criminal markets that empower them—Colombia can achieve at least some successes in countering criminal organizations.

Isabel Chiriboga is an assistant director at the Atlantic Council’s Adrienne Arsht Latin America Center.

Aaron Kolleda is a major for the US Army and is currently a visiting fellow at the Atlantic Council’s Adrienne Arsht Latin America Center.

The views in this article are the authors’ own and do not reflect the position of the US Department of Defense or the US Department of the Army.

The post Five charts that show how criminal organizations in Colombia work—and grow appeared first on Atlantic Council.

Since China began its policy of mass internment in 2017, an estimated two million Uyghurs have been arbitrarily detained in state-run internment camps, where they are subject to political indoctrination, torture, organ harvesting, and forced repudiation of their religious and ethnic identities. According to the United Nations, these abuses may constitute crimes against humanity. Several governments, including the United States, have determined that China is actively committing genocide against the Uyghurs.

Despite international calls for China to cease its human rights abuses, the government is instead furthering its repression of the Uyghurs. For those who narrowly avoid detainment in internment camps, another stark fate awaits them: subjection to China’s state-sponsored forced labor programs.

Through sanctions and the adoption of anti-forced labor legislation, the United States has led the global effort to combat China’s forced labor practices. While these measures have moved the needle in the fight against forced labor, widespread tariffs and the absence of new punitive measures targeting forced labor may cause progress to stagnate. As tensions grow and global economic uncertainties unfold, the Trump administration must ensure that it does not lose sight of Uyghur human rights. The United States can help curtail China’s forced labor practices and uphold its precedent of promoting Uyghur human rights by doubling down on its enforcement of the Uyghur Forced Labor Prevention Act and imposing additional anti-forced labor measures.

Which industries are exposed to Uyghur forced labor?

Forced labor plays a central role in China’s campaign of repression. Two systems of forced labor exist in China, which primarily target the Uyghurs. The first system exploits detainees in China’s internment camps for labor. The second system—conducted under the pretense of “poverty alleviation”—involves transferring large numbers of Uyghurs from rural regions to factories and fields across China. In both instances, authorities use intimidation and abuse to coerce individuals to labor. Following their subjection to China’s labor programs, workers face abusive working conditions, inadequate pay (if any), rigid surveillance, political indoctrination, and mandatory Mandarin lessons—a systematic effort to erase Uyghur language and culture.

Crucially, industries and supply chains across the world risk exposure to Uyghur forced labor. The Uyghur Region is deeply integrated in the global economy, accounting for roughly 20 percent of the world’s cotton, 25 percent of the world’s tomatoes, 45 percent of the world’s solar-grade polysilicon, and 9 percent of the world’s aluminum. Given that a sizable portion of the world’s production takes place in the Uyghur Region, goods that are produced through Uyghur forced labor inevitably enter international supply chains and end up in stores and households across the world.

Though forced labor touches industries ranging from automotive to pharmaceuticals, it is especially pervasive in the apparel and agriculture industries. Under conditions that raise concerns of coercion, nearly half a million Uyghurs and other ethnic minorities are transferred each year to work in cotton fields. In China’s tomato fields, workers are subject to torture, with testimonies of beatings and electric shocks administered to those who fail to meet high daily quotas. Evidence of forced labor has also emerged in the seafood industry, where Uyghurs work in Chinese processing plants that supply seafood to the United States—seafood that ends up in federally-funded soup kitchens, school lunches provided by the National School Lunch Program, and even US canned fish donations to Ukraine.

Against this backdrop, the Forced Labor Enforcement Task Force identified several industries where forced labor is deeply entrenched as high-priority sectors for enforcement. This is an important designation. However, without sustained effort and vigorous screening, products made with forced labor will continue making their way into our homes and taint everything from the clothing we wear to the food we eat.

How has the United States responded to Uyghur forced labor?

Escalating human rights abuses against the Uyghurs and other ethnic minorities have prompted governments across the world to act. The United States, as one of the leading forces opposing China’s human rights abuses, has leveraged its robust economic statecraft toolkit to institute punitive measures on individuals and entities complicit in the persecution of Uyghurs. The United States has notably imposed 117 sanctions on entities and individuals, issued investment bans on eleven companies, and implemented numerous export and import controls.

To directly combat China’s forced labor practices, Congress passed the Uyghur Forced Labor Prevention Act (UFLPA), a landmark legislation that stands as the most powerful tool globally to address Uyghur forced labor. The UFLPA was signed into law in 2021 and prevents goods made with Uyghur forced labor from entering the United States by utilizing a rebuttable presumption that any goods produced in the Uyghur Region are done so under forced labor conditions. The enforcement of UFLPA calls for sanctions on individuals and entities complicit in forced labor, and it also expands the Department of Homeland Security’s UFLPA Entity List—an import blacklist of companies with ties to Uyghur forced labor. Last updated in January 2025, the UFLPA Entity List now includes 144 entities, a marked increase from the initial twenty entities in 2022.

The UFLPA is the first law globally that counters Uyghur forced labor tangibly, comprehensively, and with meaningful economic impact. Since UFLPA’s implementation in June 2022, the US Customs and Border Protection has seized a staggering $3.69 billion worth of goods for investigation and denied shipments totaling nearly $1 billion in value entry into US markets.

Ultimately, sanctions and forced labor laws like the UFLPA have prompted companies to comply with human rights standards. Mounting pressure and increased scrutiny from the United States and the international community have led major multinational companies to withdraw from the Uyghur Region over forced labor concerns, despite firm retaliation from Beijing. By implementing the UFLPA, the United States has also set a positive precedent with numerous countries, including Canada and European Union members, adopting their own policies targeting forced labor.

Where do we stand now?

The global response to US measures countering Uyghur forced labor is evidence that pressure works. Although substantive progress has been made in the effort to combat forced labor, the Trump administration’s tariff policies may hamper further progress. On the one hand, the administration’s elimination of the de minimis exemption could help minimize a key loophole in UFLPA enforcement. Under the exemption, Chinese imports valued under $800 were allowed to enter the United States while avoiding import duties and strict customs scrutiny, limiting CBP’s ability to enforce the UFLPA. This loophole has been exploited by Chinese companies complicit in forced labor, such as Shein and Temu, which have built their entire business models around the exemption.

While the closure of the de minimis loophole could prove fruitful, the administration’s global reciprocal tariffs pose other concerns. Steep tariffs imposed on major US trading partners could inadvertently incentivize companies to look for areas in their supply chains where they can cut back on costs. This is especially concerning if these companies overlook ethical labor considerations in search for alternatives in countries like China that are laden with abusive labor practices. Additionally, imposing widespread tariffs may lead to instances of tariff evasion and could cause issues for forced labor screenings due to the obfuscation of product origins. Compounding these concerns, additions to the UFLPA Entity List have stalled since the Biden administration’s last update in January.

With the focus of world affairs shifting to spotlight trade turbulence and growing diplomatic tensions, efforts to counter forced labor and advance human rights cannot afford to lose momentum. As companies and countries navigate global uncertainties, it is imperative that the Trump administration takes a hard stance against Uyghur forced labor and ensures unabated continuity in US enforcement of anti-forced labor measures. It can do so by introducing and ramping up additions to the UFLPA Entity List. The United States could also impede China’s forced labor practices by passing the reintroduced No Dollars to Uyghur Forced Labor Act in Congress, which seeks to prohibit US contracts with companies tied to forced labor in the Uyghur Region. To ensure these measures are implemented effectively, US agencies charged with leading Uyghur-focused initiatives must be staffed with specialists who possess a deep understanding of the state-sponsored forced labor and persecution that take place in China, and who have the expertise to help identify and address sanctions evasion.

Amid geopolitical uncertainties, Uyghur human rights must be safeguarded as an enduring priority. The United States needs to act swiftly, decisively, and meaningfully to ensure that they are.

Nazima Tursun is a former young global professional at the Atlantic Council’s Economic Statecraft Initiative.

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By assenting to the continued abuse of corporate structures and short-circuiting the establishment of a database of the people who own and control real businesses operating in the United States—or “beneficial owners”—the Treasury has made the American financial system, and Americans, less safe. But that outcome wasn’t inevitable and is reversible.

The first Trump White House supported the CTA in a 2019 statement of administration policy, writing that the law “will help prevent malign actors from leveraging anonymity to exploit these entities for criminal gain… strengthening national security, supporting law enforcement, and clarifying regulatory requirements.” Other supporters included the US Chamber of Commerce, federal prosecutors, international human rights non-governmental organizations, financial institutions, police, sheriffs, faith-based groups, national security experts, and more than a hundred other organizations.

The persistent risk of anonymous shell corporations

Despite the passage of the CTA in 2020, anonymous shell companies remain a risk to the US financial system. Drug traffickers, terrorists, and nation state adversaries, including China, use our opaque corporate structure to harm Americans. In the CTA, Congress found that malign actors use US corporate law to facilitate “money laundering, the financing of terrorism, proliferation financing, serious tax fraud, human and drug trafficking, counterfeiting, piracy, securities fraud, financial fraud, and acts of foreign corruption, harming the national security interests of the United States and allies of the United States.”

High profile prosecutions demonstrate the roles that anonymous shells continue to play. For example, a Shanghai-based international drug trafficking organization used domestic Massachusetts shell companies as a US base for its operation to distribute fentanyl to customers across the country, resulting in multiple deaths before being shut down by the Department of Justice (DOJ) in 2018. Similarly, a February 2024 DOJ indictment revealed a scheme where a Chinese national used a US front company to launder Iranian oil into China, the proceeds of which funded Iran’s Islamic Revolutionary Guards Corps, a designated foreign terrorist organization in the United States.

The enduring danger that shady corporate structures present creates an imperative to act. It may also put Treasury Secretary Scott Bessent’s rollback strategy in legal peril, as long as the CTA is on the books. By statute, in order for a court to uphold the new rule, the rule must demonstrate that eliminating anonymous shell corporations: “(1) would not serve the public interest”; and “(2) would not be highly useful in national security, intelligence, and law enforcement agency efforts to detect, prevent, or prosecute money laundering, the financing of terrorism, proliferation finance, serious tax fraud, or other crimes.” The Treasury makes little attempt to achieve this impossible showing. Given this shaky legal foundation, the new rule is likely to end up in court.

Building a beneficial ownership system with less burden

If Secretary Bessent’s true objective is to ease the burden on small businesses and banks, a better way forward is to determine what went wrong in the first round of implementation and fix it, eliminating uncertainty, confusion, and unnecessary compliance burdens. Secretary Bessent has spoken fondly about how the new technology expertise at the Treasury can bring our “Blockbuster-style government in a Netflix world.” He should deploy it to ease the pain points of the first round of implementation.

For example, technology can significantly ease the compliance burden on companies who are required to report their beneficial ownership information. Reporting companies are the smallest of small businesses—by statute, only companies with fewer than 20 employees are required to report. These firms usually only interact with the federal government to file taxes. With time and resources, Treasury could collaborate with the Internal Revenue Service to allow small businesses to opt in to submitting their beneficial ownership information alongside their tax information.

Secretary Bessent could also rationalize the beneficial ownership and customer due diligence (CDD) systems, which already require financial institutions to collect beneficial ownership information from their customers. Initial implementation froze the status quo for banks and built an entirely separate—and barebones—beneficial ownership database at Treasury. There must be a better way where financial institutions and Treasury join forces to collect, maintain, validate, and deploy data jointly. They should share the costs so that the American people can enjoy the formidable national security and public safety benefits of securing our financial system against illicit actors. This could functionally reduce compliance burdens of banks without reducing the quality of information available to law enforcement.

As long as the CTA remains law, Treasury is obliged to accurately implement and enforce it. Perhaps more importantly as long as anonymous shell corporations endanger our national security and safety, the US government should mitigate the grave threat they present. Following the money remains one of the most potent tools we possess to solve crimes and protect our national security. We must not disarm.

Julie Brinn Siegel is a contributor at the Atlantic Council, former Deputy Chief of Staff at the US Department of the Treasury, and former Deputy Federal Chief Operating Officer.

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The post House quoted in Axios on regulatory gaps in the Clarity Act appeared first on Atlantic Council.

Thank you Chairman Hill, Ranking Member Waters, and distinguished members of the Committee for holding this hearing continuation and the honor of the invitation to testify on the future of digital assets. I applaud your leadership in convening the Committee on this important issue and continuing the years-long efforts of this Committee across several Congresses to evaluate and build legislation around a clear, comprehensive, and competitive cryptocurrency regulatory framework. I hope my testimony will be helpful in considering some of the most important aspects of frameworks needed to drive innovation in a secure, competitive, safe, and sound digital finance ecosystem that reinforces national security interests, defends consumers, and preserves personal liberty.

I have spent my career working at the intersection of national, economic, and technological security. I have spent two tours at the National Security Council (NSC) leading cryptocurrency initiatives; led crypto and cybersecurity policy at the US Financial Crimes Enforcement Network (FinCEN), the US anti-money laundering and countering financing of terrorism (AML/CFT) regulator; and served on advisory boards for the US Commodity Futures Trading Commission (CFTC), the Idaho Department of Finance, and the New York Department of Financial Services (NYDFS). Over recent years, I have observed massive growth, collapses, experimentation, exploitation, and innovation across the digital asset market. Of course, innovation and exploitation in finance are not unique to digital assets, and the risks and benefits of one blockchain system are not equivalent across all assets — they depend significantly on the design and features of specific systems. To make best use of the benefits and mitigate the critical risks, we need to ensure that technology, operations, and policy are aligned along critical safeguards and also with driving competitive and liquid US markets.

That brings us to this critical juncture – the current alignment and implementation of protections in digital assets is not working. The status quo has not benefited consumers, markets, or national security. As just one example, the largest heist in history just occurred in February of this year targeting this sector, perpetrated by North Korean actors as part of their revenue generation to fund activities like their proliferation program. This incident also was not in a vacuum but instead was yet another cyber theft as part of a years-long building trend in this industry exploiting both pervasive cybersecurity and AML/CFT vulnerabilities. This is just one example, which sits alongside highly volatile markets that have lost trillions and defrauded consumers, but also an environment that is reportedly set to drive the best developers abroad rather than inspiring them to stay here and build to agreed upon guardrails. Inaction by both government and industry will not achieve desired outcomes for protecting consumers or businesses.

I applaud Congress for continuing to elevate the issue of digital asset legislation to ensure appropriate regulation in the United States. Despite calls from some to avoid regulation of digital assets that may seemingly legitimize an immature sector, I maintain that regulation is critical to give a north star that demands legitimate and responsible activity within an industry with many actors who aim to bring positive evolutions in finance and cryptocurrency. Regulation also provides legitimate authorities and levers to supervisors and enforcement agencies to hold accountable illicit actors that seek to defraud consumers, launder criminal proceeds, and undermine the integrity of the US financial system. As I have testified to previously, clear and comprehensive guardrails are necessary to protect consumers, national security, and US competitiveness in financial innovation. While timely progress is critical after several Congresses being unable to establish a comprehensive approach, these frameworks must also be deliberate, thoughtful, and comprehensive of the real and present risks, as well as opportunities, that we have observed in the digital asset ecosystem and broader financial system.

The stated goals of the Digital Asset Market CLARITY Act of 2025 (the “Clarity Act”) to help address regulatory gaps and to provide clarity for an industry seeking it are laudable. Unfortunately, the tenets of the proposed legislation as drafted appear to be overly complex, forging notable gaps for coverage under consumer and market protections rather than closing them; leave insufficiently or unaddressed key areas like meaningful implementation and enforcement measures, countering illicit finance, and cybersecurity; and depart from the long bipartisan-stated principles of technology-neutrality that would enable regulations to persist in the face of technological innovations.In my testimony, I briefly offer opportunities for addressing those issues and preserving a framework built on the key pillars of sound market regulation and national security interests. I draw many of these recommendations from the groundbreaking work of the Commodity Futures Trading Commission (CFTC) Technology Advisory Committee (TAC), where I co-chaired a group of 19 incredible industry, government, and academic experts to produce a first-ever comprehensive review of risks and opportunities in decentralized finance (DeFi), with outlined steps for policymakers to take build the framework for DeFi. I encourage legislators to consider these measures especially where existing digital asset market structures differ from traditional financial market structure, and urge you to be extremely deliberate when choosing to depart from long-tested principles needed to preserve integrity of markets, such as consumer protections, resilience against exploitation and shocks, and addressing separations of functions and conflict of interests.

Regulatory gaps and potential for confusion

As I mentioned above, seeking to provide regulatory clarity, in both authority and application, are important at this critical juncture. It will establish clear rules of the road for responsible actors to engage and innovate in the space as well as ensure strong footing for regulators and enforcement agencies to oversee markets and investigate wrongdoing. A clear framework will also (finally) help level the playing field for US firms that have long been more compliant than many foreign-operating cryptocurrency businesses that exploited their savings in non-compliance as a competitive advantage against more responsible US companies.

The Clarity Act as currently written attempts to provide clarity through defining regulatory jurisdictional bounds between the Securities Exchange Commission (SEC) and CFTC as well as defining key terms of assets to establish scope of coverage as securities versus digital commodities. The bill also includes some important protection measures, specifically around areas like segregation of customer assets, limited disclosures such as around token structure and conflicts of interest, and registration requirements.

However, the Clarity Act is still absent many important protections that we have observed to be critical to protect consumers and markets in the wake of a crisis. Within the 236 pages of the bill are confusing and ambiguous definitions and missing elements that pave the way for regulatory arbitrage and exploitation:

• No clear non-securities spots market authority: This bill does not appear to clearly outline authority over spots markets for assets that are not securities. The definition of “digital commodity” may be restrictive insofar as to only cover a limited set of tokens, which would leave potentially hundreds of tokens unregulated and/or without clear guidance on its applicability even if they function as financial assets.
• Unclear definitions and impacts on securities laws: There are various definitions in the bill whose challenges with clarity may subvert the drafters’ intent to provide clarity and defend against regulatory arbitrage. Some definitions may be seen to be crafted to frame large exemptions from responsibility decentralized finance, such as in defining concepts like groups and common control in a a “decentralized governance system,” which in the bill is a system where participation (not even active involvement, just the pretext of participation) is “not limited to or under the effective control of, any person or group of persons under common control.” In another example, the bill treats assets called “investment contract assets” as digital commodities, though “investment contracts” have generally been a key element of securities laws.
• Conflating decentralization and maturity: The test for decentralization in the bill is described as a test of blockchain maturity. In a sector where projects that are (or at least claim to be) decentralized are being targeted and exploited for weaknesses in their code, cybersecurity, and irrevocability of mistakes or illicitly acquired assets, it is confusing on why a greater extent of decentralization — a concept that is also vague in the bill — inherently means maturity rather than other markers of good governance and operations. The decentralization test also introduces some confusion that may challenge real-world implementation, and is unclear on how such a feature impacts an asset functioning like a commodity versus a security. Current and former regulatory leadership has warned against arbitrary carve-outs of protections like under securities laws simply based on complex issues like decentralization that so far have largely been met with convoluted definitions that risk exemption significant amounts of high-risk investment-related activity. This also threatens potentially creating the opposite of a future-proofed regulatory approach that cannot keep up with future technological innovation.

National security and the critical role of enforcement

n the wake of serious national security threats like billion+ dollar hacks by rogue nations, growing integration of cryptocurrency as a tool for transnational organized crime, market manipulation and fraud that can threaten system integrity and stability, as well as pressure from adversarial nations seeking to develop and leverage alternative financial systems to weaken and circumvent the dollar, it is clear that strong safeguards, including for US competitiveness, are needed. This framework also demands we ensure policy and enforcement approaches both domestically and internationally create a level playing field for US firms – often the most compliant firms in the world – to be able to compete fairly. Otherwise, the foundation we build these systems on risk faltering, with the potential to not only reap significant harms but also prevent us from harnessing the greatest positive potential that is possible from a secure and innovative digital finance ecosystem.

There is limited discussion of either illicit finance or cybersecurity in the Clarity Act—many more pages are honed on establishing large regulatory carve-outs than on establishing expectations, driving needed industry standards or sponsoring research and development, or appropriating necessary resources to ensure appropriately scaled and timely enforcement of these critical requirements. Also important to note, especially in light of recent changes in enforcement posture—beyond just creating the policy framework, the government and industry must work to apply and enforce the framework. A policy that isn’t enforced or implemented does nothing to benefit consumers nor US firms with stronger compliance programs that have been operating at higher costs and less competitive advantages than many foreign-operating firms.

I have testified previously to the critical needs for strengthening AML/CFT and sanctions authorities in the cryptocurrency space, which generally have been suggested to be saved for “comprehensive market legislation.” Such enhanced protections like appropriations for skilled enforcement and investigative personnel, sharpening tools like 9714/311 designation authorities, ensuring extraterritorial application of regulations and/or through designations of entities of high national security risk, creation of an enforcement strategy to scale timely enforcement against the most egregious violators, or resourcing public-private partnerships like the Illicit Virtual Asset Notification (IVAN) program are missing from the legislation but could be easily added in to help strengthen the holistic cryptocurrency framework. In the face of disbanding of the Department of Justice (DOJ) National Cryptocurrency Enforcement Team (NCET)14 and significant downsizing and weakening of enforcement offices and personnel across the US Government, the legislation could help ensure that tools are being honed to better address the worst actors in the space. Only with meaningful enforcement can policy be truly impactful and can we reward the best actors in the space, which are typically American companies.

An alternative approach for consideration – Joint, targeted, adaptable, and balanced

I support calls for a legislative solution that enables nuance and distinct treatment across various assets based on their economic function and which will ensure persistent clarity and flexibility for regulators to address significant risks of fraud, manipulation, and investor exploitation that we have seen in the space. The legislation should also guide regulators with key principles, many of which are similar to those outlined in the Clarity Act, and should be done in full view of the benefits that some aspects of digital assets uniquely provide, such as an unprecedented level of market transparency for on-chain financial activity to enable greater market surveillance and oversight.

An alternative approach may help meet the intent of the drafters while giving time for greater exploration and experimentation while meeting near-term calls for the most beneficial transparency needs of the market, which I have observed to most consistently be calls for a clear pathway to registration. I encourage policymakers to consider a much more streamlined approach if a more complex bill proves too difficult to reconcile:

• Dual rulemaking: Similar to efforts undertaken in the wake of the 2008 Financial Crisis and pursuant to the joint rulemaking efforts directed in Title VII of Dodd Frank, Congress could again direct the SEC and CFTC to jointly develop a framework and rulemakings to give greater specificity and adaptability to approaches to ensure appropriate coverage but at least one of the markets regulators.
• Mandate for sandboxes and clear registration pathways: In the interim while the SEC and CFTC craft their approach, Congress could direct a near-term establishment via sandboxes, provisional registrations, and other requirements with clear guardrails to help ensure clear near-term coverage while giving the time needed to thoughtfully evaluate the more complex issues like dual-registered entities, defining tokens, defining the jurisdictional hand-off, and how to address DeFi. Policymakers should consider looking to the United Kingdom’s current joint efforts between the Bank of England and the FCA under the Digital Securities Sandbox for inspiration.
• Clarify commodity spots market authorities: The legislation should specify clearly authority to the CFTC over commodity spots markets, or at a minimum digital commodity spots markets.
• Explicit appropriations and mandate for additional AML/CFT and cybersecurity initiatives: The legislation would also optimally integrate near-term resourcing, not just authorizations, to ensure the ability to effectively police bad actors in the system, which should include the earlier-referenced initiatives like expanded targeting authorities, appropriations, public-private partnerships, and cybersecurity and information sharing standards.
• Undertake steps to address the regulatory perimeter and controls with DeFi: Finally, legislators should direct the SEC and CFTC to jointly undertake the steps recommended by the CFTC TAC in evaluating how to evolve market structure in addressing issues like the unique constructs in DeFi. These steps include mapping ecosystem players, processes, and data; assessing compliance and requirements gaps; identifying risks; evaluating options, benefits, and costs of changes to the regulatory perimeter, and surging research and development and standards partnerships.

With guardrails established and more consistent oversight by Congress, this approach, implemented through administrative procedure and thoughtful regulation with public engagement, I think is likely the best way to achieve a comprehensive and enduring framework.

In closing, I’d like to again underscore my gratitude for the honor of the opportunity to speak with you all today. It is critical that the United States make timely progress on establishing and implementing cryptocurrency regulatory frameworks, which should leverage years of effort on defining critical holistic protections that also reinforce the central role in the financial system and as a leader in technological innovation.

Thank you.

Fellow

Carole House

Nonresident Senior Fellow

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The post Donovan and Nikoladze cited in the South China Morning Post on the rising role of gold in sanctions evasion appeared first on Atlantic Council.

The post Donovan and Nikoladze cited by Kitco News on the reasons behind the surge in gold demand appeared first on Atlantic Council.

Governments and private actors alike are giving gold’s role in the global financial system a boost, but with a twenty-first-century twist. Individual countries and groups of countries are experimenting with creating gold-backed digital assets and trading systems that bypass the dollar-denominated financial system. In many cases, these initiatives are for purely economic benefits. However, gold is also being used by US adversaries to evade sanctions or finance activities that counter US national security interests.

The rise of gold-backed currencies that circumvent the US banking system, coupled with sanctioned regimes’ growing interest in the adoption of alternative currencies and payment systems, could create a massive blind spot for US financial intelligence and sanctions enforcement efforts. To reduce the proliferation of these alternatives to the dollar-based financial system, the United States should temper its use of coercive economic measures that can cause gold prices to rise and promote dollarization through trade and investment ties, especially with third countries impacted by sanctions on US adversaries.

Why Russia is interested in gold

Russia’s central bank is among the top holders of gold in the world, having built gold reserves from 2014 to 2020 to hedge against Western sanctions. While the central bank’s gold reserves have not increased substantially since 2020, Russia’s Ministry of Finance is thought to be buying gold from domestic producers without reporting it. In 2021, the Ministry of Finance doubled the share of gold in Russia’s National Wealth Fund to 40 percent. 

After the West froze $300 billion of the Russian central bank’s assets in response to Moscow’s full-scale invasion of Ukraine in 2022, this gold-hoarding strategy paid off. As gold prices skyrocketed this year, the value of Russia’s gold reserves increased by $96 billion, offsetting one-third of the frozen assets.

Gold has also played a major role in Russia’s illicit trade. For example, the United Arab Emirates (UAE), a BRICS+ member and a global hub for gold trade, as well as Turkey, have engaged in cash-for-gold trade with Russian banks. The Russia-based Lanta Bank and Vitabank received twenty-one shipments of currencies such as US dollars, euros, UAE dirhams, and Chinese renminbi worth $82 million from the UAE and Turkey in exchange for Russian gold. Late last year, the United States and United Kingdom sanctioned the network of entities and individuals involved in Russia’s illicit gold trade due to their role in generating revenue for Russia’s war chest. Additionally, Britain’s National Crime Agency published a red alert in late 2023 on gold-based illicit trade and sanctions circumvention. 

Apart from using gold for reserves and sanctions evasion, Russia is also trying to leverage the BRICS+ grouping as a platform to advocate for the creation of a gold-backed BRICS+ currency. It remains to be seen if the group makes any tangible progress ahead of the next BRICS+ Summit in Brazil in early July. In the meantime, tracking the rise of gold-backed currencies and alternative payment systems across the world offers valuable insights into how they could be used for sanctions evasion. 

The rise of gold-backed stablecoins

Gold-backed stablecoins—cryptocurrencies whose prices are pegged to gold—offer the most valuable property of gold, which is stability during financial uncertainty. They are also logistically more convenient to store and sell than physical gold. Companies such as Paxos* and Tether capitalized on these qualities, creating gold-backed stablecoins in 2019 and 2020, respectively. 

Usually, each token of gold-backed stablecoin corresponds to a specific amount of gold. For example, by purchasing one unit of Tether Gold (XAUT), investors receive the ownership rights of one troy ounce of physical gold on a specific gold bar with a serial number. Each gold bar weighs four hundred ounces on average, so if investors would like to redeem a gold bar, they have to own units worth one full gold bar. Issuers of these stablecoins hold gold reserves in safe vaults, typically in the United Kingdom or Switzerland. Third parties regularly audit gold reserves to confirm that the supply of tokens does not exceed the amount of gold held by issuers.

Although commodity-backed stablecoins represent less than one percent of the market capitalization of fiat-backed stablecoins, governments are now following the lead of crypto companies in experimenting with them. Earlier this month, for example, the Kyrgyz Ministry of Finance announced that it will launch a gold-backed stablecoin called USDKG in the third quarter of 2025. The Kyrgyz Ministry of Finance holds gold reserves worth $500 million and plans to expand that number up to $2 billion. (This is separate from the gold reserves held by the National Bank of the Kyrgyz Republic, which was among the top buyers of gold in the last quarter of 2024.) USDKG will not track the price of gold, unlike well-established stablecoins such as Paxos Gold or Tether Gold. Instead, it will be pegged to the dollar but solely backed by gold reserves. USDKG holders will be able to redeem gold, other crypto assets, or fiat currency. 

The reported objective of the gold-backed stablecoin is to facilitate cross-border inflows of remittances, which make up one-third of Kyrgyzstan’s gross domestic product. Russia accounts for more than 90 percent of remittances that flow into Kyrgyzstan, sent by migrant workers back to their families. Kyrgyzstan has not yet launched the stablecoin, but if it’s going to be used to facilitate cross-border flows with Russia, then there is a chance that certain actors could use USDKG to export sanctioned goods to Russia outside of US authorities’ oversight. Financial institutions in Kyrgyzstan have already been sanctioned for their involvement in Russia sanctions evasion schemes by the United States. 

For example, earlier this year, the Treasury Department sanctioned Kyrgyzstan-based Keremet Bank for facilitating transactions on behalf of US-sanctioned Russian bank Promsvyazbank. The Kyrgyz Ministry of Finance sold the controlling shares of Keremet Bank to a firm connected to a Kremlin-linked Russian oligarch in 2024. According to the Treasury press release, the transaction was intended to turn Keremet Bank into a sanctions evasion hub that would enable Russia to receive payments for exports and pay for imports. Given sanctioned Russians’ strong interest in taking advantage of Kyrgyzstan’s financial system to import restricted technologies, they will likely be drawn to USDKG because of its ability to process transactions with Kyrgyz entities while completely bypassing the US banking system. 

How the US can stem the digital gold rush

It is no coincidence that stablecoins account for 63 percent of all illicit crypto transactions and have become a preferred tool for sanctions evasion. They attract sanctioned entities because of their ability to transfer value pseudonymously with high speed and at low cost. While the US Senate recently advanced the GENIUS Act to regulate stablecoins, one of the major deficiencies of the bill is that it does not adequately regulate offshore stablecoin issuers. Even if put into law, the GENIUS Act would fail, for example, to regulate Tether, the largest offshore issuer of dollar-pegged stablecoins, which has been the subject of federal investigations because of its alleged widespread use by terrorist groups and Russian arms dealers. 

Unlike US-issued or dollar-backed stablecoins, foreign-issued gold-backed stablecoins such as USDKG will likely escape US regulation because they don’t have a touchpoint with the US banking system. Their proliferation, along with gold-backed trading schemes, is driven to a large extent by the United States’ weaponization of the dollar, as well as uncertainty over US trade policy. 

The United States has the power to indirectly reduce gold prices and encourage the adoption of dollar-backed assets by returning to being the provider of stability in the global economy. That can be achieved by dialing down the use of tariffs and other economic measures that could cause governments and private actors to turn to gold.

At the same time, the US government should promote the dollarization of economies such as Kyrgyzstan’s by continuing to provide financial assistance and deepening trade and investment ties with other third countries impacted by sanctions against Russia. Doing so will help close gaps in US financial intelligence, strengthen US sanctions enforcement, and lower the demand for currencies outside the dollar-based financial system.

Kimberly Donovan is the director of the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. She is a former senior Treasury official and National Security Council director. Follow her at @KDonovan_AC.

Maia Nikoladze is an associate director at the Atlantic Council’s Economic Statecraft Initiative within the GeoEconomics Center. 

Note: Paxos is a partner of the Atlantic Council’s GeoEconomics Center.

The post Gold’s geopolitical comeback: How physical and digital gold can be used to evade US sanctions appeared first on Atlantic Council.

That was made clear at this year’s International Monetary Fund and World Bank Spring Meetings, where financial leaders warned about job loss and increasing poverty rates across these countries. 

But there are changes African countries can make to better withstand the economic headwinds they are facing. One such opportunity they should immediately seize lies in strengthening their approaches to combating money laundering and terrorist financing. By addressing deficiencies in legal and regulatory frameworks and by adjusting for developments in financial technology, African countries can bolster financial inclusion and tap economic growth opportunities—while preventing the abuse of the global financial system by nefarious actors. 

Key deficiencies seen across Africa—in the form of weak legal and regulatory frameworks, limited institutional capacity to conduct financial supervisory or enforcement activities, and a high degree of informality of economic activities—make it difficult to combat money laundering, terrorist financing, and other illicit financial flows. The Financial Action Task Force (FATF), a global money laundering and terrorist financing watchdog, keeps track of jurisdictions that do not meet global standards to combat money laundering, publicly identifying jurisdictions with weak performance on a “black list” and “grey list.” The black list hosts only three countries (North Korea, Iran, and Myanmar), but on the grey list, fourteen of the twenty-five countries (just over half) are African. Grey listing can result in serious reputational and economic damage, with negative spillover effects on economic growth, borrowing costs, foreign investment flows, and financial inclusion efforts—a particularly concerning impact considering that in Sub-Saharan Africa, less than half the population has a bank account. Given these effects, African countries have worked to make significant improvements to their anti-money laundering and combating the financing of terrorism (AML/CFT) frameworks. Over the past few years, several countries that were once placed on the grey list have been removed, including Zimbabwe, Botswana, Morocco, and Mauritius.

One piece of the regulatory puzzle involves cryptocurrencies. FATF Recommendation 15 for combating money laundering and terrorist financing directs countries to identify and assess “risks emerging from virtual asset activities.” FATF data from March indicates that of the forty-one Sub-Saharan African countries with publicly available data, only seven countries were rated “compliant” with Recommendation 15, indicating that the country successfully met the global standard. For African countries looking to become more compliant, there are positive examples on the continent to draw upon; for example, South Africa was recently upgraded to “largely compliant” with Recommendation 15 and is continuing to make progress towards full compliance. 

At the same time, African governments must also harness the power of digital finance to weather today’s economic headwinds. According to the International Monetary Fund, as of 2022, just 25 percent of countries in Sub-Saharan Africa formally regulated cryptocurrencies, and two-thirds had implemented restrictions, with six countries having outright banned cryptocurrencies. The impact of this approach leaves the investors and entrepreneurs who are interested in Africa’s digital assets sector inclined to hold back investments due to the excessive regulatory uncertainty and possible regulatory swings. Africa is one of the fastest-growing crypto markets in the world, and crypto assets are actively used across the continent. 

Recent reporting from Chainalysis suggests that the cryptocurrency value received by Sub-Saharan Africa was less than three percent of the global share between July 2023 and July 2024. While this is a small global share, there is significant variance in adoption rates across the continent’s fifty-four countries, with a number of countries still rating relatively high in global adoption: Nigeria ranked second worldwide, and Ethiopia, Kenya, and South Africa also ranked in the top thirty countries. From 2022 to 2023, bitcoin was legal tender in the Central African Republic, but finance experts raised concerns about the lack of electricity and infrastructure and the high risk of money laundering and terrorist financing. One thing is certain: digital assets—including cryptocurrencies—are changing the financial landscape of the region. 

That digital finance can transform Africa’s financial landscape should be viewed positively. Africa’s population is set to increase from 1.5 billion in 2024 to 2.5 billion in 2050. This is the moment for African governments to leverage the economic power of their demographics, but to do that, they will need to consider public policies that support greater financial inclusion. Of the eight countries that will account for more than half of the global population growth between now and 2050, five of them are in Africa; two of them are global leaders in crypto adoption rates.  

As populations age and enter the workforce, African governments should consider how best to promote technological innovation in their societies, including in financial technology. Cryptocurrency adoption in African countries can be used for small retail transactions, for sending or receiving remittances, as a hedge against inflation, for business payments, and, potentially, for solving sticky foreign exchange issues in places such as Central Africa, where such issues dramatically reduce foreign investments. Due to its decentralized nature, cryptocurrencies can help people bridge the gap in access to financial services and formal banking systems in many countries across the continent.  

On one hand, governments have tried to use digital assets to boost financial inclusion, tax revenue, and small retail transactions with limited success; and on the other, countries have banned, unbanned, regulated, and deregulated cryptocurrencies, leaving a patchwork of regulatory frameworks across the continent for consumers and business to navigate. With such jurisdictional regulatory arbitrage and limited enforcement mechanisms, nonstate actors, including terrorist groups in Africa, are able to take advantage of the technologies and services that can move money the fastest and cheapest—and in ways that are least likely to be detected or disrupted. That can lead these actors to cryptocurrency.   

While serving as head of delegation to both the Central and West African FATF-style regional bodies, I heard from African government officials repeatedly that there were no digital assets being used in their countries and that their AML/CFT regulatory regimes were sufficient. This is simply not the case. African countries should consider policies to encourage the adoption of emerging financial technologies, including cryptocurrencies and other digital assets, while still exercising great care to avoid creating conditions allowing for regulatory arbitrage between countries or monetary unions that can be exploited by bad actors seeking to launder money or finance terrorism. Beyond policy frameworks, African governments should empower their enforcement agencies with the appropriate resources to ensure that policies, laws, and regulatory frameworks protect the integrity of the global financial system.  

Benjamin Mossberg is the deputy director of the Atlantic Council’s Africa Center. 

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At the same time, threatening allied countries and fellow NATO members with tariffs or invasion upends any potential cooperative economic statecraft with these same states. It may seem like business as usual in certain corridors of the executive branch. The reality is that trade tensions and geopolitical shake-ups rattling traditional US alliances are weakening these tools and exacerbating business uncertainty at a time when the global economy may be least able to afford it.

As a force multiplier, partnerships are key to effective economic statecraft. To paraphrase Daleep Singh, former US deputy national security advisor for international economics, the force of economic statecraft is directly related to the size of the coalition implementing and enforcing the authorities. Multilateral sanctions and cooperative targeting amongst allies have been key pillars of US sanctions policy to date. They reinforce legitimacy by demonstrating agreement across governments and enable safe and legitimate markets to take shape, compounding confidence in the global flow of goods and services. Yet the actions of the current US administration—in many ways picking up where it left off—are straining US relations with stalwart friends like Canada and the European Union (EU). Ursula von der Leyen, the president of the European Commission, went so far as to say that “the West as we knew it no longer exists.”

The fracturing of traditional alliances carries significant consequences for companies facing multijurisdictional compliance obligations, meaning an already complex situation will become more chaotic. The United States used to expend significant diplomatic effort to convince its allies to harmonize sanctions and trade controls. This level of cooperation can no longer be taken for granted and may lead to more significant divergence, particularly regarding Russia. The Kremlin has already requested various forms of sanctions relief in exchange for a ceasefire in Ukraine. The United States has also quietly delisted some high-profile targets like Karina Rotenberg and Antal Rogan, with the secretary of state going so far as to publicize that Rogan’s “continued designation was inconsistent with US foreign policy interests.” Companies are taking notice, too. Raiffeisen Bank International, after years of concerns over its business in Russia, is reportedly slowing its efforts to exit Russia with the notion that “rapprochement between Washington and Moscow” may be in sight.

This complexity was foreshadowed in the wake of Russia’s February 2022 reinvasion of Ukraine and the 2018 US “maximum pressure” sanctions campaign against Iran. These events led to greater discord between US and allied sanctions and may contain clues for how the present situation could evolve. For example, when the first Trump administration withdrew from the Iranian nuclear deal, the EU expanded its “blocking statute.” The statute was intended to protect EU companies engaged in otherwise lawful business from the effects of extra-territorial application of US sanctions, but it ultimately produced a series of headaches and lawsuits for major multinational companies. Will the United States attempt the same, and try to shield US persons from EU and United Kingdom (UK) sanctions? Major multinational companies suddenly freed from the burdens of US sanctions may find themselves held back by EU or UK and risk drawing the ire of the US government if they err on the side of caution so as not to violate European laws.

The United States cannot expect to practice status quo ante economic statecraft while simultaneously trying to reshape the global order. US allies rightfully followed the lead of prior US administrations in establishing robust tools of economic statecraft, and these will not be “deleted” at the whims of the United States—if anything, present conditions suggest the EU may need to strengthen these tools. At the current rate, US actions are likely to produce a number of adverse consequences beyond diplomatic disunity and compliance nightmares. The United States may drive illicit finance into the US economy, for instance, if major US clearing banks are compelled to handle Russia-related transactions and the administration is already deemphasizing anti-corruption initiatives.

To be sure, US lawmakers may have leverage to prevent the Trump administration from providing wholesale sanctions relief. Some members are pushing for strong, new sanctions requirements tied to any Ukraine ceasefire deal. The negotiations between Presidents Trump and Putin and their teams are unpredictable, to say the least. However, it is becoming clear that no matter what the future holds, we may have already seen the zenith of transatlantic synchronization on sanctions and trade controls. The nadir is shaping up to be a mess.

Jesse Sucher is a nonresident senior fellow at the Atlantic Council’s Economic Statecraft Initiative.

The views and opinions expressed herein are those of the author and do not reflect or represent those of the US Government or any organization with which the author is or has been affiliated.

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Watch the full event

Public Event Fri, April 25, 2025 • 3:30 am ET

Technology and the future of the financial system with Nasdaq CEO Adena Friedman

AN #ACFRONTPAGE EVENT—Adena Friedman, chief executive officer of Nasdaq, shares her vision for the future of the global financial system.

Economy & Business Financial Crimes & Illicit Trade Financial Regulation International Financial Institutions

According to Nasdaq CEO Adena Friedman, the movement of illicit funds through the financial system “is a global issue, and it requires global solutions.”

Friedman spoke at an Atlantic Council Front Page event on April 25, citing a Nasdaq study from last year that found that more than three trillion dollars had moved through the global financial system illegally in 2023.

Pondering the solutions needed for such a large-scale issue, Friedman said that the public, private, and technology sectors will need to work together. Markets process billions and billions of transactions, and, as she explained, it can be difficult to distinguish between those that are legitimate and those that are not.

“It’s a little bit of looking for a needle in a haystack,” Friedman said.

Below are highlights from the conversation, moderated by Economic Statecraft Initiative Director Kimberly Donovan, which covered technology’s role in the financial system and the impact of global volatility on markets.

When fin meets tech

• For Friedman, artificial intelligence (AI) is an increasingly promising approach to detect and report financial crimes to banks and law enforcement. “We’ve got to be able to unleash the technology to the best of its ability,” Friedman said. 
• “It’s amazing, unfortunately, how sophisticated the criminals can be” as they use more sophisticated tools, including AI and other leading-edge technology, Friedman warned. She said that banks, markets, and law enforcement would need to look to AI, cloud technology, and automation to thwart and disrupt the financial dealings of criminals and criminal networks. 
• Friedman said she has seen a shift among banks in the last decade, as competition among them has been tempered with a sense that collaboration is needed to solve the problem of financial crime. 
• Technology has also helped Nasdaq respond to market shocks, Friedman pointed out. In the first ten days of April, she said, Nasdaq experienced five of the top six trading days in equities ever in the United States and four of the six top options trading days. At the peak, on April 7, “we had 550 billion messages flowing through our systems in that day, just to be able to manage the level of supply and demand that was coming into the markets,” she said. That’s roughly double the previous number of daily messages. 

Responding to recent volatility

• “It’s a very, very dynamic time for investors,” Friedman said, speaking at the end of a month that has been volatile for markets following back-and-forth US tariff announcements. 
• “I always try to put myself the head of an investor when you go through these periods of uncertainty and change,” Friedman said, explaining that in response to greater uncertainty, many investors are pulling back. “There’s a lot of change. There’s a lot that’s unknowable and therefore, they’re taking risk off.”
• But this approach is likely to be followed in short order by investors redeploying their capital, Friedman said. 
• Looking at how investors responded to the COVID-19 pandemic is instructive, she explained. In the early days of the pandemic, when uncertainty was most acute, there were big drawdowns in capital. But as soon as people realized that they could operate in the new environment, investors were able “to bring their capital back in a smart way and redeploy,” Friedman explained.
• But markets have adapted to the shocks and volatility, she added. “I just want you to understand that the plumbing has been working,” Friedman said of markets’ resiliency to respond to recent trading activity and ensure stability. 

John Cookson is editor of the New Atlanticist.

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The post Nasdaq CEO Adena Friedman on how technology can be used to tackle financial crime appeared first on Atlantic Council.

Over the last decade, economic statecraft has evolved to become an oft used but ill-defined catchall for the levers of economic and financial policy that advance American national security interests. The implicit assumption often articulated is that US economic and foreign policy strength is best served by unifying “sticks and carrots,” relying not just on the reach of US enforcement but also on the strength of the dollar and the centricity of US financial institutions in the global financial system. While the goals have evolved, the institutions and processes have not kept pace. Stovepiped decision-making within the executive branch and an overreliance on a subset of tools—particularly sanctions—have left the Department of the Treasury, and by default the American financial sector, carrying out only half of the Treasury’s national security mission to combat threats and promote US economic interests at home and abroad.

America’s adversaries are not standing idly by. Their expertise and sophistication are growing at an unparalleled rate, whether through the creation of economies of scale for sanctions evasion; alternative non-US dollar, non-SWIFT settlement systems; or the faster-than-government adoption of emerging technology.

As the current administration revisits the functions and mechanics of government, near-term steps can be taken, under existing statutory authorities, to modernize how the United States uses its economic strength to combat national security threats and promote American interests. This function falls neatly within the Treasury’s remit as the steward of the US economy and financial sector.

Establish an interagency coordination function

As US administrations—regardless of the party in power—are increasingly reluctant (if not opposed) to use military power, economic tools are disproportionately the weapons of choice. Despite the reliance on these levers to address every foreign policy challenge, there is no central coordinating body that is tasked with leading the deployment of these actions or even coordinating tools in the US toolbox. Over successive administrations, this has led to fragmentation and duplication between and within departments and agencies; ineffective assessment of policies, tools, and effects; lack of coordination between punitive and positive measures; overuse of certain tools; and development of nearsighted, short-term policies at the expense of broader strategic goals.

To mitigate these challenges, the Treasury should establish an economic statecraft and security committee, with periodic reports to respective principals, to coordinate interagency work and policies. Representatives from relevant departments and agencies would evaluate policy objectives and identify response options, taking into consideration financial sanctions, regulatory actions, export controls, tariffs, and other “offensive” tools as well as the design and review of development financing, commercial engagement, anti-money laundering/countering the financing of terrorism (AML/CFT) technical assistance programs, and other “carrots” or affirmative tools to establish a clear articulation of goals, end states, objectives, key milestones, and specific outcomes for the aforementioned authorities.

A central coordinating body is desperately needed to effectively deploy all economic tools at the US government’s disposal and ensure that actions are properly sequenced and evaluated. The goal is not to outsource the current role of the National Security Council (NSC); instead, it is to preserve NSC-led strategy and decision-making while injecting a technical coordinating element so the agencies can present a well-crafted and coordinated “menu” of options. The current siloing of tools between the departments of Treasury, State, Commerce, Defense, and others has created a moral hazard for enforcement and undervalues the leverage that the United States maintains with its development and technical assistance programming in supporting national security.

This approach is similar to other models that were created to address gaps in interagency coordination including the Directorate of Strategic Operational Planning within the National Counterterrorism Center, the Committee on Foreign Investment in the United States (CFIUS), and the joint interagency task forces (JIATFs) at combatant commands. This proposed interagency body can be created pursuant to Treasury’s existing authorities and staffed with existing Treasury resources from the Office of Terrorism and Financial Intelligence (TFI), with the addition of staff detailed from other departments and agencies in the form of liaison officers, joint duty assignments, and other such agreements. Departments and agencies represented on the committee should include the Treasury (all components of TFI and International Affairs), the Intelligence Community (IC), the departments of State, Justice, Defense, Commerce, and Energy, the Office of the US Trade Representative, and the International Development Finance Corporation. The Department of the Treasury—and specifically, the policy office of Terrorist Financing and Financial Crimes (TFFC)—is best suited to lead such work, as it closely aligns with its existing statutory mission and the Treasury has an established track record of developing and refining tools to support its AML/CFT mandate, while reconciling humanitarian assistance, derisking, and other unintended consequences. Further, this approach is in line with and implements the authorities provided to the secretary of the Treasury in Section 6104 of the Anti-Money Laundering Act of 2020 within the National Defense Authorization Act of 2021, which directs the secretary to maintain an interagency rotational program to strengthen the United States’ AML/CFT regime and capabilities.

Rejuvenate Treasury’s Office of Intelligence and Analysis

More than two decades after 9/11, Treasury’s Office of Intelligence and Analysis (OIA) confronts several substantive and structural challenges. Sanctions remain the preferred foreign policy tool for policymakers, which has driven US adversaries such as China, Russia, Iran, and others to develop alternative payments systems and mechanisms to circumvent the US dollar-based financial system and “sanctions-proof” their economies. However, across the US government, including at Treasury, there is often a disconnect between economic security and national security that favors generic analysis of disparate topics over complex financial interdependencies. Given TFI’s mandate to protect the US financial sector, OIA should harness its proximity to practitioners and reestablish itself as an economic security analysis unit that provides both a tools-based analysis of national security challenges and studies critical changes to global settlement and efforts to dedollarize the international financial system. To accomplish this efficiently, OIA should detail individuals with macroeconomics expertise from Treasury’s Office of International Affairs, focusing on geoeconomic threats to US interests. It should avoid duplicative tactical functions, such as those of the Office of Global Targeting in the Office of Foreign Assets Control (OFAC) or of the other sixteen IC agencies, while preserving room for strategic network analysis.

Furthermore, the Treasury’s relative lack of internal senior decision-makers (e.g., the secretary, deputy secretary, and three undersecretaries) has incentivized OIA to focus too heavily on external customers and finished intelligence production (e.g., the President’s Daily Brief) that are largely the domain of other, better-resourced IC agencies. This focus has come at the expense of internal Treasury customers, who would be better placed to use and incorporate timely, actionable OIA analysis. OIA’s signature analysis should instead focus on the needs of the Treasury and the deployment of its economic tools including detailed financial analysis, second- and third-order analysis of sanctions and other economic tools, and strategic monitoring and impact assessments. Like the State Department’s Bureau of Intelligence and Research, OIA enjoys regular access to decision-makers—far greater than other members of the IC—working hand in glove with Treasury’s financial attachés, sanctions experts, financial regulators, policymakers, law enforcement, and deployed intelligence and military teams.

OIA should institutionalize more internal mobility across TFI and Treasury writ large to support the mission of economic statecraft-focused analysis. This will increase staff expertise and combat attrition, and is a practical exigency given how many foreign policy issues are simultaneously macroeconomic and illicit finance challenges.

Empower and formalize its attaché program

Treasury’s attaché program, which has existed in some form for decades, places senior Treasury staff in key posts internationally to support development and implementation of US government policy priorities around countering illicit finance and supporting macroeconomic stability. Attachés serve as the Treasury Department’s official representatives to one or more host countries, working directly with foreign finance ministries, central banks, law enforcement authorities, and local financial services firms to inform, develop, and implement economic security policy. The attaché program is an essential but underresourced tool in US economic statecraft.

The current Treasury attaché program is logistically managed by the Department of the Treasury. As of 2025, there are approximately a dozen Treasury attachés serving around the world, although the posts are not static. Unfortunately, attaché positions open and close on a regular basis, often due to changing resources rather than exigent policy needs. For instance, the Treasury has only had a sporadic attaché presence in some posts with major geopolitical significance—including Ankara, Jerusalem, Kiev, and Moscow—largely due to reallocations in department funding and shifting international priorities from one administration to the next. This inconsistency has major implications for the ability to nurture lasting diplomatic ties to host country economic policymakers and to encourage meaningful policy change over the longer term.

Further, internal logistics for the Treasury attaché program are managed on an ad hoc basis, unlike established foreign service officer programs at peer agencies, including the Agriculture, Commerce, and State departments, each of which has a professional foreign service. This creates friction within the embassy system and within the Treasury itself. Because the attaché program is seen as intermittent, the State Department—which is in charge of managing missions and posts overseas—is often reluctant to empower the attaché role, leading to inefficient, long-standing bureaucratic battles between State Department economic officers, who often lack substantive illicit finance and/or macroeconomic analysis expertise, and Treasury attachés. Internally, there is no career service within the Treasury Department for attachés, even though the role is coveted among senior staff. Attachés have limited support at the end of their tours and are often not considered promotion-eligible while serving overseas. Consequently, the Treasury has struggled to retain attachés over time. There are practical ways, however, to enhance the Treasury attaché program and ensure that it effectively supports economic statecraft initiatives.

First and foremost, Congress should formalize the Treasury attaché program by including Treasury as one of the designated foreign service agencies and formally establishing a Treasury diplomatic service corps. The Anti-Money Laundering Act of 2020, which requires Treasury to maintain an attaché program, falls far short in this regard and should be expanded or amended to formally designate Treasury as a foreign service agency. Benefits of congressional recognition of Treasury as a foreign service agency include better integration of Treasury attachés in embassy interagency country teams and clearer lines of reporting directly to either the ambassador or chief of mission rather than to State Department economic officers. A formalized diplomatic program also mitigates the risk of abrupt opening and closing of posts from administration to administration, ensuring greater durability of Treasury attaché posts overseas and less politicization in making location determinations.

Second, the Treasury should establish a lean but dedicated Treasury attaché management office. At present, posts are informally designated as either IA-owned or TFI-owned, yet nearly all posts require substantive expertise and regular engagement with both Treasury components. A management office would reduce the tendency within the Treasury to create silos between IA and TFI and would promote the implementation of a more holistic economic statecraft policy that represents all the department’s interests with foreign partners. A dedicated attaché office would also support returning attachés following their tours, integrate them back in the department, and ensure that the department is able to retain its highest-performing officers.

Introduce technological improvements so that resources are more effective

As America’s adversaries increasingly rely on sophisticated evasion tools and leverage big data and emerging technology to hack, steal, and obfuscate their trail, TFI cannot afford to lean on legacy systems and heavily manual processes to carry out its monitoring, targeting, and enforcement. Doing so only delays timely action, reduces the efficacy of sanctions efforts, and promotes a generally “reactive” stance toward geopolitical change. Against the wider efficiency-enhancing backdrop, modernizing the information technology (IT) infrastructure will position TFI to move at the “speed of business,” allowing the sophisticated and highly technical expertise of TFI staff to be put to higher-order tasks protecting the financial sector and dollar.

At the base of this pyramid is timely and comprehensive analysis of information from a diverse and variable range of qualitative and quantitative data sets, ranging from suspicious activity reports (SARs) and trade data to bulk financial and classified source material. Advancements in IT systems and the targeted deployment of artificial intelligence (AI) will allow TFI’s staff expertise to shift toward evaluating outcomes rather than inputs and will also reduce time spent manually reviewing data sources. A few targeted examples:

• AI and large learning models (LLMs) should be used to help identify trends and indications of high risk among the millions of SARs and other Bank Secrecy Act (BSA) reporting that the Treasury’s Financial Crimes Enforcement Network (FinCEN) receives annually from covered financial institutions. This would allow FinCEN and law enforcement agencies to more easily review and analyze data that the private sector spends billions of dollars to report per year as part of their BSA compliance requirements while hard-coding in rules-based, rather than user-based, privacy controls. This would also support better partnerships with law enforcement and within Treasury and the broader interagency work supporting sanctions targeting, investigations, regulatory policymaking, and enforcement actions.
• OFAC reviews thousands of licensing requests a year relating to the sanctions programs it administers. While each license request relies on a unique set of circumstances, LLMs should be used to enable better triage and processing of licensing requests while steering thin resources toward escalation and review.
• OFAC should leverage AI to compile information needed for sanctions packages that would then be reviewed by sanctions investigators, allowing for faster and more policy-responsive drafting of packages and limiting what is currently a manual process.
• Treasury should develop more robust and autonomous economic modeling, leveraging the expertise of International Affairs and the Office of the Chief Sanctions Economist to increase the diagnostics available to policymakers and evaluate the second-order and economic effects of statecraft tools.
• Treasury should evaluate and streamline internal TFI technology where inefficiencies currently exist; for instance, TFI has multiple duplicative technology networks between FinCEN and the other TFI offices, which complicate information sharing and cyber security while missing opportunities for economies of scale.
• Treasury should evaluate technical improvements to facilitate how the private sector provides BSA reporting and other financial information, including but not limited to SARs, currency transaction reports (CTRs), and CFIUS submissions to streamline processes and reduce costs for both the private and public sectors.
• Treasury should create a TFI chief innovation officer position that reports to the under secretary and works in collaboration with Treasury’s chief technology officer and chief AI officer. The TFI chief innovation officer must be empowered to procure systems and eliminate duplicate resources across components to marshal and use resources well. Without a TFI-specific technology strategy, the organization will fall into the familiar pattern of tinkering with decades-old systems rather than identifying essential upgrades.

The opportunity to modernize US economic statecraft is now

In a March 6 speech at the Economic Club of New York, Secretary Scott Bessent noted that “economic security and national security are inseparable” and that Treasury’s tools and authorities are a critical component of US foreign policy. While Treasury’s tools and authorities remain strong, the ways in which they are used are antiquated. To meet the economic and national security challenges of today, the administration must improve upon the perceived mistakes of its predecessors by leveraging existing authorities and resources to enhance the effectiveness and efficiency of the US economic statecraft tool kit. Facilitating interagency coordination and collaboration on economic statecraft, improving intelligence analysis that informs these economic statecraft policies, enabling the Treasury attaché program, and enhancing Treasury’s capabilities through technology innovations will modernize how the United States wields its economic strength to more effectively protect our economic and national security and the integrity of the US financial system.

Lesley Chavkin is Global Head of Policy at Paxos and a Nonresident Senior Fellow in the Atlantic Council’s GeoEconomics Center. She previously served in a variety of roles at the US Treasury Department, including as Financial Attaché to Qatar and Kuwait.

Eitan Danon is a content marketing manager at Chainalysis. He previously served in several roles at the US Treasury Department and in the US intelligence community. He is also an adjunct senior fellow at the Center for a New American Security and a security fellow at the Truman National Security Project.

Kimberly Donovan is the director of the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. She previously served in senior roles within the US Intelligence Community, US Treasury Department, and the National Security Council at the White House.

Andrew Gallucci is the Senior Director for Regulatory Strategy at Circle. He previously served in a variety of roles at the US Treasury Department and in the US intelligence community.

Caroline Hill is a Senior Director for Global and Regulatory Strategy at Circle. Caroline’s government time included serving as the Director for Latin America and Africa in the Office of Terrorist Financing and Financial Crimes at the US Treasury Department, as well as Senior Advisor to the Assistant Secretary and Financial Action Task Force President.

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Conflict minerals and the M23 insurgency 

The Great Lakes region of Africa, which straddles the DRC, Rwanda, Burundi, and Uganda, supplies 30 percent of the world’s coltan, a crucial mineral for high-end electronics. Other valuable minerals, such tin, tungsten, tantalite, and gold, are often mined alongside coltan in the region. Artisanal mining is common—while this provides livelihoods for many, it also gives rise to dangerous working conditions, child labor, and political conflict and instability.  

Much of the region’s coltan is deemed a conflict mineral as mining areas are controlled by armed groups and organized crime. The DRC government lacks firm control of its territories, especially in the eastern provinces, and transportation infrastructure is underdeveloped. Because of these challenges, foreign companies often avoid direct mining in the DRC, instead purchasing minerals through middlemen. 

The M23 rebel group, an ethnic Tutsi-led militia in the eastern DRC, is fighting the DRC national army and claims to protect Tutsi populations from Hutu militias. Its resurgence in 2022 is linked to frustrations over the government’s slow implementation of peace agreements and worsening security, although it is argued that M23 acts in service of Rwanda’s interests in the region’s minerals. The M23 insurgency is allegedly financed through the exploitation of coltan and other minerals, including reports that M23 fraudulently exported at least 150 metric tons of coltan (7-10 percent of DRC’s annual global supply) to Rwanda in 2024. Current estimates put this as high as 120 metric tons per month. The current involvement and role of Rwanda is evidenced by the presence of 4,000 Rwandan army personnel and heavy weaponry.  

The ongoing insurgency has halted regular mining activities, leading to “command” mining in which rebels control operations. This is affecting production levels, worker safety, and regional investment. Conflict has placed all transport routes under rebel control, increasing costs and delays due to road closures and violence.  

An important dynamic for global supply chains is that rebel groups like M23, along with other middlemen, foster the mixing of legal and illegal minerals. This effectively launders the illegally mined material, allowing its sale to parties that are mandated to buy ethically sourced product, such as US-based customers who must comply with the Dodd-Frank Act. These sales channel profits to armed groups while depriving the DRC of its rightful revenue. Rwanda is effectively complicit, as it does not charge taxes on mineral exports and allows imported goods to be reassigned as “Made in Rwanda” if they are transformed or processed within the country with a minimum 30 percent value addition. 

DRC efforts to regain control 

Amid the ongoing conflict in the eastern DRC, there is an intensified call for international accountability and economic reforms to address resource-driven violence. At the February 2025 United Nations (UN) Human Rights Council session, the International Chamber of Commerce and Development urged the UN to enhance transparency in raw material transfers from Rwanda to combat mineral exploitation crimes. Enhanced oversight, it argued, would hold resource looters accountable. 

Additionally, at the Munich Security Conference, the DRC accused Rwanda of destabilizing the region to exploit its minerals and proposed measures to encourage legitimate investments and transparent contracts while urging the international community to facilitate peace.  

The DRC, meanwhile, has classified certain mining sites in North and South Kivu provinces as “red” zones, halting mineral trading in these areas. The country is orchestrating legal and regulatory efforts, including installing ore tracking mechanisms to combat the illegal mineral trade, disrupt conflict financing, and align mining practices with international standards. The red zone classification is intended to last six months and includes independent audits to ensure responsible sourcing.  

On the diplomatic and military front, a quid pro quo of mineral rights for security cooperation seems to be developing whereby the DRC is courting Western governments’ security assistance to thwart the Rwanda-backed incursion. Much of the international community is also demanding stricter standards for purchasing minerals ostensibly mined and processed in Rwanda. The DRC will need international support to implement measures for strict oversight of the region and, more fundamentally, addressing the sources of instability that fuel the conflict. On a positive note, in late March, a Qatar-brokered peace summit resulted in commitments by the leaders of the DRC and Rwanda to cease hostilities. 

Next steps

Achieving lasting peace in the eastern DRC requires addressing the root causes of conflict, including ethnic tensions, political instability, and competition for mineral resources. It will not come quickly.  

The DRC needs sustained dialogue with rebel groups and neighboring countries to reach a peace agreement and foster reconciliation among ethnic groups. It also needs to improve the capacity and legitimacy of institutions to manage resources, provide security, combat corruption, and enhance transparency. 

Meanwhile, mineral buyers and the international community can help the DRC by enforcing ethical sourcing that follows regulations like the Dodd-Frank Act and OECD guidelines, supporting peace initiatives with diplomatic and financial aid, and providing humanitarian assistance to support displaced populations, rebuild communities, and enforce human rights laws. 

The M23 insurgency is yet another reminder that the international community must support resource-rich countries in building the capacity to formalize mining and adhere to recognized principles for working and living conditions. The United States’ and others’ overtures to help provide security may be a good first step, but it only sets a foundation for much more work to be done. 

Clarkson Kamurai is the critical minerals program manager at the Payne Institute and a PhD researcher in the minerals and energy economics program at the Colorado School of Mines. Kamurai has engineering experience in base and precious metal mining in sub-Saharan Africa and South America. 

Brad Handler is the program director for the Payne Institute for Public Policy’s Energy Finance Lab. Previously, he was an equity research analyst in the oil and gas sector at investment banks including Credit Suisse and Jefferies.  

Morgan Bazilian is the director of the Payne Institute for Public Policy at the Colorado School of Mines and a former lead energy specialist at the World Bank. 

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EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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The post Illicit mineral supply chains fuel the DRC’s M23 insurgency  appeared first on Atlantic Council.

Over the years, Beijing and Tehran have developed an oil trade system that bypasses Western banks and shipping services. Russia adopted Iran’s methods for exporting sanctioned oil after the Group of Seven (G7) allies capped the price of Russian crude oil at sixty dollars per barrel in December 2022.

As a result, Iran, Russia, and China have created an alternative market of sanctioned oil, wherein payments are denominated in Chinese currency. This oil is often carried by “dark fleet” tankers that operate outside of maritime regulations and take steps to obscure their operations.

Oil revenue from China is propping up the Iranian and Russian economies and is undermining Western sanctions. Meanwhile, the use of Chinese currency and payment systems in this market restricts Western jurisdictions’ access to financial transactions data and weakens their sanctions enforcement efforts.

How China manages to import sanctioned Iranian oil

China has developed a way to import Iranian oil while bypassing the Western financial system and shipping services. Iran ships oil to China using dark fleet tankers and receives payments in renminbi through small Chinese banks. The dark fleet tankers operate without transponders to avoid detection. Once oil shipments reach China, they are rebranded as Malaysian or Middle Eastern oil, and bought by “teapots” in China. “Teapots” are small independent refineries that have been absorbing 90 percent of Iran’s total oil exports since Chinese state-owned refiners stopped transacting with Iran due to the fear of sanctions.

“Teapots” are believed to be paying Iran in renminbi using smaller US-sanctioned financial institutions like the Bank of Kunlun. This strategy allows China to avoid exposing its large international banks to the risk of US financial sanctions.

How Iran could make use of the renminbi payments from China

Once Iran gets paid in renminbi, it has two options for using Chinese currency: It can either buy Chinese goods or park assets in a Chinese bank. Iran cannot spend much in renminbi outside of China because the currency is not entirely freely tradeable, and is therefore less desired by other countries as a store of value or unit of account. The role of the renminbi in international trade has increased in the past few years, but it’s driven by China’s renminbi-denominated trade with its partners. The currency is rarely used for transactions by two countries when one is not China.

Consequently, in 2022, Iran bought $2.12 billion worth of machinery from China, as well as $1.43 billion worth of electronics. While data on financial transactions between Iran and China is not accessible, there is a high probability that Iran’s imports of Chinese technology are denominated in renminbi.

Another use Iran could find for the Chinese currency is building up foreign exchange reserves in renminbi. In October 2023, the deputy chief of the Central Bank of Iran said that Iran’s foreign reserves are increasing because of the growth in oil and non-oil exports. If oil revenues are a significant contributor to the growth of Iran’s foreign exchange reserves, and if China is buying Iranian oil in renminbi (trade data indicate that around 90 percent of Iran’s oil exports are going to China), then a considerable share of Iran’s reserves could be denominated in renminbi.

Additionally, Iran’s willingness to find alternative currencies and diversify away from the US dollar is coinciding with Beijing’s internationalization ambitions for its currency. Thus, Beijing may also have an interest in paying Iran in renminbi and building Iran’s renminbi reserves. (The Central Bank of Iran does not publish data on the currency composition of its international reserves. The absence of data makes it difficult to confirm this theory.)

Russia has been copying Iran’s methods for circumventing sanctions

Russia’s full-scale invasion of Ukraine and subsequent imposition of sanctions have put Russia in a similar situation as Iran. Russia also started using a “shadow fleet” to ship oil to China and has resorted to the use of the renminbi for trade to circumvent the oil price cap. It must be noted that Russia’s situation is not as dire as Iran’s when it comes to sanctions: Trading in Russian oil is tolerated as long as buyers pay sixty dollars or less per barrel, while buying Iranian oil is banned regardless of the price. This gives Russia more flexibility to ship oil to other destinations and, by extension, more bargaining power in price negotiations with China.

Nevertheless, Russia is now heavily dependent on China and has a similar model of trade with China as Iran: Russia exports oil to China and imports technology. In 2022, Russia received $88 billion from Beijing from energy exports and paid $71.7 billion for Chinese goods. Since Russia and China have switched to the use of national currencies, ruble-renminbi trade increased eighty-fold between February and October 2022.

But China helps Russia only to the extent that it does not harm its own interests. For example, after the United States created a new secondary sanctions authority in December 2023, three out of the four largest Chinese banks stopped accepting payments from sanctioned Russian companies. Russian officials claim that they are working with their Chinese counterparts to resolve the issue, but Beijing is unlikely to go back to transacting with sanctioned Russian entities as long as the sanctions threat prevails. Thus, while secondary sanctions did not directly target oil payments from China, this shows that if the West were to threaten to sanction large Chinese companies for importing Russian oil above the price cap, Beijing would likely comply.

How the West can begin to respond

The effectiveness of sanctions against Iran, Russia, and other heavily sanctioned regimes should not be analyzed in silos, because these countries don’t operate in silos. Knowledge sharing on evasion techniques and economic cooperation with China have allowed both Iran and Russia to mitigate the effects of sanctions.

Western authorities should start looking into financial linkages between heavily sanctioned regimes, as well as their economic cooperation with China, and consider how evasion techniques developed by previously sanctioned regimes can be used by newly sanctioned countries. This will help Western sanction-wielding authorities improve the design of sanctions and close loopholes before they can be exploited. Such analysis would also help the West develop an understanding of what sanctions can and cannot achieve, and what unintended consequences they could result in.

Kimberly Donovan is the director of the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. Follow her at @KDonovan_AC.

Maia Nikoladze is the assistant director at the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. Follow her at @Mai_Nikoladze.

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