FATF urges stronger action against illicit finance in virtual assets

Outlines enforcement gaps and rising illicit threats

The Financial Action Task Force (FATF) has released its sixth targeted update on the implementation of anti-money laundering and counter-terrorist financing (AML/CFT) measures for virtual assets (VAs) and virtual asset service providers (VASPs). According to the report, stronger global action is required to address illicit finance risks linked to VAs and VASPs, with enforcement gaps highlighted.

In its latest assessment, published as part of the sixth targetted update, the Financial Action Task Force (FATF) has stated that existing efforts remain insufficient, calling for stronger global action to tackle illicit finance risks associated with virtual assets (VAs) and virtual asset service providers (VASPs), while drawing attention to ongoing enforcement shortcomings.

In a press statement, FATF says that the report reviews how jurisdictions are applying Recommendation 15 and its interpretative note, which were updated in 2019 to bring the virtual asset sector under international AML/CFT obligations. It observes that while jurisdictions with significant levels of VASP activity have taken steps to introduce or enforce AML/CFT frameworks, several implementation gaps remain.

It adds that it identifies the need for further progress in licencing and registration systems, and points to ongoing difficulties in identifying natural or legal persons engaged in VASP operations.

FATF says that Jurisdictions continue to face challenges in managing risks associated with offshore VASPs.  It notes that the cross-border and decentralised nature of virtual assets complicates oversight and can undermine efforts by individual authorities.

The watchdog says that 99 jurisdictions have enacted or are in the process of enacting legislation aligned with the travel rule, which aims to enhance transparency in cross-border virtual asset transactions. To support implementation, it has published Best Practices on Travel Rule Supervision, which outlines measures jurisdictions may consider in designing their supervisory frameworks.

The statement says that the report includes an updated table documenting the progress of jurisdictions in the organisation’s global network that host materially important VASP activity.

The statement says that these jurisdictions account for around 98 pc of the global virtual asset market. It states that full implementation of its standards within this group is essential to reducing risks across the international financial system.

As per the statement, the intergovernmental body highlights an increase in the criminal misuse of virtual assets, noting that stablecoins are now widely used by illicit actors. It states that actors from the Democratic People’s Republic of Korea (DPRK), terrorist networks and drug trafficking groups are among those increasingly using stablecoins, which now represent a majority of on-chain illicit activity.

FATF says that the report identifies the DPRK’s 2025 theft of USD 1.46 billion from the virtual asset service provider ByBit as the largest such incident to date. With only 3.8 pc of the stolen assets recovered, it states that the case reflects ongoing challenges in asset recovery and the need for enhanced international cooperation.

It also reports a sharp rise in fraud and scams involving virtual assets. One estimate provided by an industry participant suggests that on-chain illicit activity linked to fraud and scams totalled approximately USD 51 billion in 2024, making it one of the most significant threats within the sector.

Additionally, drawing from enforcement cases such as the United Kingdom’s Operation Destabilise, the anti-terrorist organisation emphasises the importance of international coordination and the ability to freeze and seize virtual assets to disrupt illicit financial flows and criminal networks.