Sovereign Vectors and the Impossibility of Global AML Compliance: A Game-Theoretic Analysis of State Defection from Oracle Networks

Global AML compliance frameworks assume that sovereign states can be induced to participate in universal monitoring infrastructure through a combination of sanctions, cooperation incentives, and treaty obligations. This paper formalizes why this assumption fails. We model state participation in ZK-based AML oracle networks as a game-theoretic decision under the Sovereign Impossibility Theorem: no voluntary oracle network achieves universal participation because rational haven jurisdictions and active state actors face dominant defection strategies regardless of sanction levels. Validated against three documented sovereign vectors — deliberate haven jurisdictions, active state-sponsored laundering (DPRK/Lazarus Group), and passive institutional failure — with a formal payoff model calibrated to public data from the UN Panel of Experts, Tax Justice Network, and FATF mutual evaluation reports.