FATF Warns Incomplete Crypto Regulations Are Fueling Illicit Finance
The Financial Action Task Force (FATF) has issued its 7th Targeted Update on Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service Providers, calling for stronger oversight of digital assets to close regulatory gaps exploited by criminals. While 83% of surveyed jurisdictions have advanced crypto regulations and the Travel Rule under FATF Recommendation 15, 11 jurisdictions are still lagging, allowing criminal networks to abuse virtual assets for illicit purposes, including fraud, sanctions evasion, and money laundering. The FATF highlighted risks from stablecoins, citing a case where a Cambodia-based money laundering node issued a stablecoin marketed as immune to asset freezing. Offshore virtual asset service providers (VASPs), registered in weakly regulated jurisdictions, also pose challenges for risk mitigation. FATF President Giles Thomson emphasized that implementation of standards can no longer be delayed, urging governments and the private sector to strengthen preventive measures, close regulatory gaps, and bolster cross-border cooperation.