The Financial Action Task Force (FATF) has called for accelerated implementation of international standards for the regulation of virtual assets and their service providers, warning that criminal groups are exploiting regulatory loopholes in some countries to transfer billions of dollars of illicit funds through the cryptocurrency sector.
And the warning came in the group’s seventh annual report, “Targeted Update for the Implementation of FATF Standards on Virtual Assets and Virtual Asset Service Providers,” released on July 16, and focused on the extent to which countries are committed to implementing Recommendation 15, which was amended in 2019 to expand AML/CFT rules to include cryptocurrencies and their trading platforms.
Limited improvement in compliance
The report showed a slight improvement in the level of global commitment, with the proportion of countries classified as “largely committed” to standards rising from 29% in 2025 to 34% in 2026.
More than 85% of the countries assessed reported that they had conducted studies to assess the risks of money laundering, terrorist financing and financing the proliferation of weapons of mass destruction.
And yet, the Group stressed that the improvement is still insufficient, noting that only 48 out of 149 countries have been able to apply an effective risk-based approach, which reflects the continued existence of significant gaps in converting risk assessments into practical control and operational measures.
Regulatory loopholes exploited by criminal networks
And many countries have not yet succeeded in activating licensing and registration systems for virtual asset service providers, and are facing difficulties in identifying people or companies that are actually engaged in these activities.
The group stressed that the persistence of these loopholes gives criminal organizations an opportunity to exploit markets with weak oversight, which threatens the integrity of the global financial system.
Blocking cryptocurrencies is not enough
And the report pointed out that some countries that have imposed a total or partial ban on cryptocurrencies or their trading platforms, have not taken regulatory or legal action against companies that continue to operate illegally within their territories.
The FATF considered that the embargoes are permitted by its standards, but they may turn into a source of risk if they are not accompanied by effective oversight mechanisms that prevent the continuation of illicit activities.
Challenges of Cross-Border Platforms
And while progress has been made in licensing and registration efforts, the report stressed that many countries still face difficulties in dealing with service providers operating outside their borders, warning that this gap will widen with the continued growth of the decentralized finance (DeFi) sector.
'Travel rule' still faces obstacles
The report also addressed the level of implementation of the so-called “Travel Rule”, which obliges virtual asset service providers to exchange sender and beneficiary data when executing digital transfers.
And he explained that 91 out of 109 countries have passed legislation to apply this rule, but practical implementation is still weak, as about half of the countries that issued legislation did not take any regulatory or executive measures to ensure compliance with it.
More complex crimes
And the report confirmed that crimes related to virtual assets have become more organized and complex over the past year, with the expansion of the activity of international fraud networks, cross-border money laundering, and electronic theft, as well as the growing use of cryptocurrencies in operations attributed to North Korea.
And the Spanish police’s dismantling of a cryptocurrency investment fraud network suspected of laundering around 460 million euros belonging to more than 5,000 victims around the world is a clear example of the cross-border nature of these crimes.
Artificial Intelligence and Stable Currencies
And the Financial Action Task Force warned of the growing use of artificial intelligence in the implementation of crimes related to digital assets, along with the increasing reliance of criminal actors on stablecoins to hide the paths of illicit funds.
A call for broader international cooperation
And the head of the Financial Action Task Force, Giles Thompson, who took office in early July, stressed that time no longer allows to postpone the implementation of international standards, calling on governments and the private sector to strengthen cooperation to fill regulatory gaps, tighten oversight, and develop mechanisms for cross-border cooperation.
Thompson said that the development of organized crime methods requires keeping pace with technological development with more effective control measures, stressing that protecting the global financial system requires constantly updating control tools to prevent criminals from exploiting weaknesses in regulatory systems.
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