In January 2025, the U.S. re-designated the Houthi group as a terrorist organisation, aiming to cripple its financial networks and curb Iranian influence across the region despite it’s shadow economy. The new sanctions target financial transfers and blacklisted individuals, banks, and companies suspected of funding the group’s operations.
Yet the Houthis anticipated this move.
Expect the Inevitable: Houthi Strategy
The group has learnt from Trump’s initial designation back in 2021. Since then, the group manufactured a sophisticated shadow economy including a transnational network of smuggling, document forgery, and counterfeit currency that allows them to operate far beyond the reach of sanctions.
From Sana’a to Beijing, Tehran to Al-Mahra, this illicit infrastructure now underpins their ability to wage war and survive diplomatic isolation.
At its core are two vital tools: forged passports and smuggled money. Together, they form the invisible arteries of the Houthis’ regional operations.
Passports as Weapons
Whilst the Trump administration’s 2021 designation aimed to tighten the noose, the redesignation achieves the opposite.
Therefore, the group developed an unprecedented passport forgery operation by 2023.
According to disclosed sources, the Yemeni embassy in Beijing received a report from a Chinese company about an individual named Mahmoud Saeed Hezam Al-Amri, posing as a diplomat and requesting to print banknotes, passports, and fiscal stamps by August. A subsequent UN Panel of Experts report confirmed that Al-Amri was carrying a forged Houthi-issued passport — part of a larger effort to infiltrate Yemen’s diplomatic representation abroad.
However, it was not an isolated case. The same UN report documented dozens of forged passports, used by Houthi operatives and foreign allies: Iranian, Lebanese, and other Arab actors involved in military support programs. These fake documents enabled the transport of weapons, the movement of fighters for military training, and the smuggling of illicit goods across borders.
Forged passports are becoming one of the Houthis’ most effective tools for evading international restrictions and enabling the flow of people and materials critical to their war machine.
Printing Money as a Political Weapon
Yet, the Houthis’ forgery skills extend far beyond documents. Counterfeit currency is a potent weapon in their shadow economy.
In May 2017, Yemeni forces in Al-Jawf seized a truck carrying counterfeit 5,000-riyal banknotes with a total face value of roughly 35 billion Yemeni riyals. Investigations traced the printing back to a German company owned by Reza Heydari, an Iranian businessman linked to the IRGC. Heydari was sentenced to seven years in Germany and placed under U.S. sanctions.
The group is shifting its focus to alternative suppliers. Working with intermediaries in Asia, particularly Indonesia, the Houthis have procured specialised inks, security paper, and printing equipment to support ongoing forgery operations.
According to diplomatic sources in Jakarta, these supplies now feed both passport and currency forgery programs.
In parallel, the group has imported printing machinery from China, exploiting gaps in regulation and oversight within the global security printing industry. The flow of smuggled funds and fake currency has helped the Houthis maintain liquidity, finance operations, and distort local economies in their favor.
Silent Smuggling, Hidden Financing
Following their re-designation in January 2025, the Houthis doubled down on these networks. The reopening of Sana’a airport — intended for humanitarian flights — has instead become a gateway for smuggling.
A security officer in Al-Mahra reported that forged passports were used to smuggle IRGC and Hezbollah experts into Yemen. Major General Salem Abduljabbar, Deputy Head of Yemen’s Passport Authority, said that in one month alone, the Houthis issued ten forged passports.
These were used by both Yemenis and foreign operatives to travel between Sana’a, Oman, and Iran. Four were intercepted at the Shahn border crossing, while others vanished into the region’s illicit networks.
Despite intensified border checks and weapon seizures, the smuggling of people, funds, and forged documents continues unabated. The shadow economy has proven highly adaptable; a moving target for traditional sanctions regimes.
A Battle on Uneven Ground
Sanctions alone are no longer enough to dismantle the Houthis’ financial system.
Instead, Yemeni authorities, supported by international partners, must continue to prioritise the development of a tracking system for forged passports.
However, experts warn that piecemeal efforts are insufficient. What’s required is sustained and coordinated action, particularly with countries serving as transit points or enablers within the smuggling networks. Key transit points include the Yemeni-Omani border whilst forgery exists often via Indonesia and China.
The Houthis’ parallel economy is no longer just a tool of survival; it is a deliberate strategy to finance prolonged conflict and expand political influence across Yemen and the wider region.
From counterfeiting currency to smuggling operatives, the group has built an ecosystem of illicit flows that buttress its military campaigns.
Breaking this ecosystem will require more than UN resolutions or public condemnations. It demands intelligence sharing, targeted enforcement against enablers, and political will from international actors. The Houthis have proven adept at evasion, but with the right tools and cooperation, their shadow economy can be dismantled.
For now, the war is as much about money and forgery as it is about bullets and bombs. The battle for Yemen is being fought on the dark edges of the global economy: a battlefield the world can no longer afford to ignore.
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