FATF Updates on VASPs, Reveals $51B Fraudulent Transaction

On June 26th, the Financial Action Task Force (FATF) published the sixth targeted update for the execution of FATF standards regarding VAs and VASPs.  The main goal of this guidance is to safeguard the integrity of virtual assets.

The Paris-based watchdog called on nations to promptly identify and assess proliferation financing (PF), money laundering (ML), and terrorist financing (TF) risks associated with virtual assets (VAs) and virtual asset service providers (VASPs) and establish mitigation plans.

This update assesses jurisdictions’ compliance with AML/CFT measures in VAs and VASPs with FATF Recommendations 15 and its Interpretative Note (R.15/INR.15), updated in 2019. FATF noted progress in implementing AML/CFT measures for virtual assets since 2024.

Meanwhile, FATF highlights a need for further measures in jurisdictions facing difficulty in identifying legal persons conducting VASP activities.

Despite progress, the FATF points out that additional efforts for licensing and registration are required.

The update further identifies that it is still difficult for many regions to correctly identify the people or organisations engaged in VASP operations. Additionally, there are ongoing challenges in mitigating the dangers associated with offshore VASPs.

FATF has also published best practices on crypto Travel Rule supervision to help jurisdictions develop their supervisory frameworks.

“99 jurisdictions have either enacted or are in the process of enacting laws to implement the Travel Rule, aimed at increasing transparency in cross-border transactions”.

 (Financial Action Task Force)

Additionally, the FATF report includes an updated table outlining the steps jurisdictions took to regulate VA/VASPs. These jurisdictions in the FATF’s Global Network constitute 98% of the global VA market; therefore, they can help reduce global risks overall.

Read More: 

• FATF Renews Its Guidance on Financial Inclusion and AML Measures
• Key Outcomes from the FATF Plenary held on 23-25 October 2024
• MENAFATF Sets 2025 Strategic Goals to Enhance AML/CTF Efforts Across the Region

Virtual assets require serious consideration and regulatory frameworks to mitigate emerging risks. There has been a significant rise in the use of virtual assets in fraud and scams. As per one industry estimate, fraudulent and scam-related transactions on blockchain networks totalled over $51 billion in 2024.

The FATF has also raised concerns about the growing use of stablecoins by “various illicit actors“, including the Democratic People’s Republic of Korea (DPRK), terrorist financiers, and drug traffickers.  Notably, DPRK performed the largest VA theft in history. It cost $1.46 billion. 

According to the FATF, “most on-chain illicit activity now involves stablecoins”, which has continued to grow since 2024. This increasing reliance on stablecoins can fail to implement FATF standards.