PARIS — The watchdog that monitors global and illicit misuse of funds cited North Korea as a top source of “ongoing and substantial” money laundering and terrorist financing in a report issued Friday, and urged countries to keep North Korea at arm’s length and close its banks.

The Financial Action Task Force said in the report issued after plenary session that North Korea has failed to address “significant deficiencies” in its system to combat the ills that pose a risk to the international financial system. It also expressed concern over illicit activities linked to the proliferation and financing of weapons of mass destruction.

The FATF report on North Korea came as President Donald Trump increased U.S. sanctions on North Korea on Friday, blacklisting scores of companies and ships accused of illicit trading with the pariah nation.

The Paris-based global watchdog that monitors measures taken by nations to combat money laundering and terrorism financing urged nations to be cautious about business ties and transactions with North Korea, taking “necessary measures to close existing branches, subsidiaries and representative offices of (North Korean) banks within their territories.”

Targeted measures and sanctions are aimed at protecting world financial sectors from involvement in money laundering or financing terror or North Korea’s nuclear program.

Iran was singled out in the report, but the task force chose to maintain its suspension of counter-measures.

Bosnia and Herzegovina was removed from the FATF list, judged to be in compliance with efforts to counter money laundering and terror financing. Pakistan, which had feared it would end up on a watch list, got a reprieve.

The report urged Iran to continue addressing items on a now-expired action plan to combat money laundering and terrorist financing, citing an eight-item “to do” list that includes freezing terrorist assets and adequately criminalizing terrorist financing, including by removing the exemption for designated groups ‘attempting to end foreign occupation, colonialism and racism.'”

The FATF warned that that action could be taken in June against Iran if progress is not made.

The report named nine countries with “strategic deficiencies,” including Iraq, Syria, Yemen and Tunisia.

Pakistan escaped mention, despite foreboding that it could be listed.

A Foreign Ministry spokesman in Islamabad, Mohammad Faisal, said at a news briefing earlier Friday that the U.S. and Britain had jointly submitted a letter to the FATF nominating Pakistan for placement on a “grey list.” Faisal said most of the concerns raised by Washington had been addressed in 2015, and Pakistan was still working to take more measures.

The U.S. Embassy in Islamabad said the international community had “consistently expressed its longstanding concerns about ongoing deficiencies in Pakistan’s implementation of its anti-money laundering/counterterrorism finance regime. These concerns remain, even as Pakistan has recently begun to take action to address these deficiencies.”

Pakistan was on a list from 2012-2015 and feared a return would deter foreign investment and hurt access to international financial markets.

Munir Ahmed in Islamabad contributed to this report.

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