The Financial Action Task Force (FATF) has called on countries around the world to urgently step up their defences against illicit finance involving cryptocurrencies, warning of growing threats that now extend into sectors such as online gaming.
In its latest report, released in late June, the FATF assessed global progress on anti-money laundering (AML) and counter-terrorist financing (CFT) measures related to virtual assets (VAs) and virtual asset service providers (VASPs). It found that while 99 jurisdictions have enacted or are drafting relevant legislation, major enforcement gaps remain.
The report highlighted widespread difficulty in identifying individuals or entities running VASP operations. Regulatory systems remain inconsistent across borders, exposing the global financial system to criminal misuse.
A key area of concern is the so-called ‘Travel Rule’, which requires VASPs to collect and transmit sender and recipient information during crypto transfers. Seventy-three percent of jurisdictions surveyed—85 out of 117—have passed laws aligned with the Travel Rule. However, the FATF noted that most have yet to implement or enforce these rules correctly, weakening their overall effectiveness. To aid enforcement, the FATF has released a new guidance report outlining best practices for supervising the Travel Rule.
The report also raised alarm over the rising use of stablecoins—cryptocurrencies designed to maintain a fixed value—by criminal actors, including sanctioned regimes, terrorist groups and drug traffickers. Since 2024, the share of illicit activity involving stablecoins has risen sharply.
One of the most serious incidents cited involved hackers linked to North Korea stealing around $1.46 billion (approximately €1.37 billion) from the crypto exchange ByBit earlier this year. Just 3.8 percent of the stolen funds have been recovered, underlining the challenges in tracking and recovering stolen digital assets.
The FATF also warned that cryptocurrencies are becoming increasingly embedded in online gaming and gambling platforms, where they are used for payments, in-game purchases and peer-to-peer transfers. These activities, particularly when operated by unlicensed or illegal platforms, present new avenues for money laundering and terrorist financing.
Fraud and scams involving virtual assets are also on the rise. Industry estimates suggest that crypto-related fraud totalled $51 billion (around €47.9 billion) in 2024. The report noted a spike in sophisticated schemes, including AI-generated deepfake scams, romance frauds and so-called ‘pig butchering’ investment cons.
Despite some progress, only 29 percent of jurisdictions are largely compliant with the FATF’s Recommendation 15, which extends AML/CFT obligations to VAs and VASPs. Nearly half remain only partially compliant, while 21 percent are not compliant at all.
The FATF has warned that without coordinated global action, vulnerabilities in one country could pose risks for the entire international financial system.
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