Proliferation financing: meaning and UK AML duties

What is proliferation financing?

Proliferation financing (PF) means providing funds or financial services connected with chemical, biological, radiological or nuclear (CBRN) weapons, their means of delivery, or CBRN-related goods and technology, in breach of UN-based financial sanctions. Since 1 September 2022, every firm regulated under the Money Laundering Regulations 2017 (MLRs) must assess its PF risk and cover it in its policies.

The UK definition, in MLR reg 16A(9), is narrower than the everyday meaning. It only covers funds or services provided “in contravention of a relevant financial sanctions obligation”: UK sanctions regulations that give effect to UN Security Council non-proliferation obligations. HMRC guidance adds that CBRN-related goods include dual-use goods and technology used for non-legitimate purposes.

Why it matters to a small firm

HM Treasury’s 2021 national PF risk assessment names banking, insurance and shipping, defence and dual-use suppliers, universities, cryptoassets and the ease of setting up UK companies among the sectors most likely to be targeted. It does not single out estate or letting agency. It does flag trust and company service providers, which some accountancy practices also are, and it warns that every part of the UK economy could be exploited. The duty applies to every relevant person, whatever its size, and supervisors check it. HMRC expects a money laundering, terrorist financing and proliferation financing risk assessment before you apply to register, and its officers ask for the written assessment before a visit.

Regs 18A and 19A are both “relevant requirements” in Schedule 6 of the MLRs, so a breach can lead to a civil penalty (reg 76) or a criminal offence (reg 86).

What regs 18A and 19A require

Rule	What it means for your firm	Where
Assess PF risk	Take appropriate steps to identify and assess the PF risks your business faces	Reg 18A(1)
Use the right inputs	Take into account HM Treasury’s national PF risk assessment and risk factors on customers, countries, products and services, transactions and delivery channels	Reg 18A(2)
Keep it proportionate	Size the steps to the size and nature of your business	Reg 18A(3)
Write it down	Keep an up-to-date written record and give it to your supervisor on request	Reg 18A(4)–(5)
Policies, controls and procedures	Written, proportionate controls for the PF risks you found, approved by senior management and reviewed	Reg 19A
Training	Staff training must cover proliferation financing too	Reg 24

Source: MLR regulation 18A and regulation 19A, inserted by SI 2022/860 from 1 September 2022.

For a small firm, this usually means a short PF section in your existing firm-wide risk assessment and a section in your AML policy on how your controls, mainly sanctions screening, cover it. Our free firm-wide risk assessment template is a starting point to adapt.

The national PF risk assessment

The latest edition is HM Treasury’s “National risk assessment of proliferation financing”, first published on 23 September 2021. ICAEW reported in February 2026 that HM Treasury is updating it, so check GOV.UK for a new edition when you next review your assessment.

Points to weigh in your assessment

These prompts come from the UK definition and the risks and case studies in the 2021 national PF risk assessment. They are not a full list.

Country links: a client, beneficial owner or source of funds connected with North Korea or Iran. Both are subject to UK counter-proliferation sanctions and, as at June 2026, both were on the FATF call-for-action list, which separately triggers enhanced due diligence.
Goods and trade: a client that makes, trades or finances dual-use goods or technology.
Sanctions matches: a client or owner who matches, or nearly matches, a designated person on the UK Sanctions List.

How it links to sanctions screening

Because UK law defines PF through financial sanctions, sanctions screening is your main control.

OFSI, part of HM Treasury, implements financial sanctions, including the counter-proliferation regimes, and enforces civil breaches.
The FCDO decides designations and publishes the UK Sanctions List.
The National Crime Agency handles criminal enforcement.

If you know or have reasonable cause to suspect that you hold funds or economic resources of a designated person, freeze them and do not deal with them unless an exception or OFSI licence applies. Estate agents, letting agents, accountants and legal professionals must report to OFSI as soon as practicable. Our guide to sanctions screening for small firms explains when to screen and how to handle a match.

Frequently asked questions

Is proliferation financing the same as terrorist financing?

No. Terrorist financing is about funding terrorism. In UK law, proliferation financing is about funds or services for CBRN weapons and related goods in breach of UN-based financial sanctions. The MLRs treat them as separate risks.

Do I need a separate PF risk assessment?

Not necessarily. The MLRs do not require a separate document. HMRC guidance (AMLG1800) treats your risk assessment as one written document or series of documents covering money laundering, terrorist financing and proliferation financing risks. A clear PF section in your firm-wide assessment, with your reasoning, can meet the duty.

Sources

How AML Buddy helps

AML Buddy runs the client checks for small UK regulated firms. Your client verifies their identity (ID document and selfie) through one secure link, and each check covers address matching, sanctions and PEP screening and adverse media, with a timestamped PDF report for your file. Your PF risk assessment, policies and any reports to OFSI stay with your firm. See pricing.

Proliferation financing