The Financial Action Task Force (FATF) issued its 7th Targeted Update on Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service Providers, warning that incomplete crypto regulations are enabling illicit finance. The report highlighted that criminals continue to exploit regulatory gaps, citing a Cambodia-based money laundering node that issued a stablecoin marketed as immune to asset freezing. While 83% of surveyed jurisdictions have advanced crypto regulations and the Travel Rule under FATF Recommendation 15, the task force emphasized that offshore virtual asset providers operating in jurisdictions with weak oversight remain a challenge for risk mitigation.
FATF Reports 83% Jurisdiction Progress on Crypto Regulation and Travel Rule
The report acknowledged that crypto regulations and the implementation of FATF Recommendation 15, including the Travel Rule, have advanced in 83% of surveyed jurisdictions. However, 11 jurisdictions are still working on this implementation. Recommendation 15 calls for the regulation of Virtual Asset Service Providers (VASPs) and the monitoring of existing Anti-Money Laundering / Countering the Financing of Terrorism (AML/CFT) risks.
On Thursday, the FATF called for further work on regulation, licensing, and registration of VASPs to address the remaining gaps that are leveraged by threat actors for illicit purposes.
Offshore VASPs and Illicit Stablecoin Case Highlight Regulatory Gaps
Dealing with offshore VASPs—institutions registered in jurisdictions with weak or underdeveloped regulations that can offer services in other markets—is mentioned as a challenge for risk mitigation in some jurisdictions.
The misuse of stablecoins is also a relevant factor for the FATF, which registered a case of the issuance of a stablecoin by a Cambodia-based money laundering node that was marketed as immune to asset freezing, a feature common to all regulated centralized stablecoins.
FATF President Calls for Strengthened Cross-Border Cooperation
FATF President Giles Thomson highlighted that the implementation of FATF standards can no longer be delayed, as "criminal networks continue to abuse virtual assets for illicit purposes and exploit their borderless nature to commit fraud and scams, evade sanctions and launder the proceeds of crime."
"Governments and the private sector must work together to strengthen preventive measures and close regulatory gaps, bolster cross-border co-operation and deny criminals the opportunity to exploit weak links in the global system," he concluded.
FAQ
What did FATF announce in its 7th Targeted Update on crypto regulation?
The Financial Action Task Force issued its 7th Targeted Update on Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service Providers, warning that incomplete crypto regulations are enabling illicit finance and that criminals exploit regulatory gaps.
How many jurisdictions have implemented FATF crypto regulations and the Travel Rule?
The report acknowledged that 83% of surveyed jurisdictions have advanced crypto regulations and the Travel Rule under FATF Recommendation 15, while 11 jurisdictions are still working on implementation.
Why did FATF highlight offshore VASPs as a regulatory challenge?
Offshore VASPs are institutions registered in jurisdictions with weak or underdeveloped regulations that can offer services in other markets, making them a challenge for risk mitigation in some jurisdictions.
