As digital assets continue to integrate into the global financial system, the Financial Action Task Force (FATF) is urging countries to take faster, more decisive action against their misuse. In its sixth targeted update on the implementation of anti-money laundering and counter-terrorist financing (AML/CFT) rules for virtual assets (VAs) and virtual asset service providers (VASPs), the global watchdog identifies severe gaps in enforcement that are allowing illicit finance to flourish across sectors, including online gaming.
The report evaluates jurisdictions’ compliance with FATF Recommendation 15 and its Interpretative Note. These guidelines, revised in 2019, extend AML/CFT responsibilities to VASPs. While 99 jurisdictions have implemented or are working on relevant laws, FATF warns that inconsistency and weak enforcement remain critical concerns. “Jurisdictions continue to face difficulties in identifying natural or legal persons that conduct VASP activities,” the report stated.
Travel Rule Progress Uneven and Mostly Unenforced
A major focus of the report is the status of the Travel Rule—a FATF requirement for VASPs to collect and transmit identifying data about the originator and recipient in virtual asset transfers. As of this update, 73 percent of surveyed jurisdictions (85 out of 117) have enacted legislation aligned with the rule. However, the FATF emphasized that legislation alone is insufficient. Most countries have not yet enforced these laws, nor have they issued compliance directives or penalties for non-compliance.
To support better implementation, the FATF also published a companion guide: Best Practices on Travel Rule Supervision. This new resource offers practical frameworks to help regulators design robust supervisory systems. Still, the FATF warned, “With virtual assets inherently borderless, regulatory failures in one jurisdiction can have global consequences.”
Stablecoins and Hacks Drive New Threats
The report expresses particular concern about the growing use of stablecoins—cryptocurrencies pegged to fiat currencies—for illicit activity. These tokens offer speed, liquidity, and anonymity, making them appealing to legitimate users and criminal networks alike. According to the FATF, “most on-chain illicit activity now [involves]
stablecoins.”
One of the most alarming cases this year involved North Korean-affiliated hackers who stole $1.46 billion from the crypto exchange ByBit. Only 3.8 percent of the stolen assets have been recovered. The FATF noted this as the largest virtual asset theft ever recorded and an example of the urgent need for stronger international cooperation and more effective asset recovery frameworks.
Crypto Scams and Sophisticated Fraud Schemes Surge
The report also sheds light on the rising scale of fraud and scam activity involving digital assets. According to estimates cited by the FATF, roughly $51 billion in illicit on-chain activity in 2024 stemmed from scams and fraud. These schemes are becoming increasingly sophisticated and professionalized, with networks operating globally.
The FATF references several scam types identified by its Virtual Assets Contact Group (VACG), including “pig butchering” investment frauds, address poisoning, and approval phishing. Fraudsters are also using AI tools and deepfake technology to carry out romance scams and phishing attacks. These developments reflect what the FATF describes as a dangerous professionalization of crypto-enabled crime.
Gaming Sector Emerges as a Laundering Channel
Cryptocurrencies are also playing a growing role in online gaming and gambling. FATF reports that these platforms—particularly those involving games of chance or skill—are increasingly linked to virtual asset transactions. “There continues to be a link between VAs and gambling and games of chance/skill, and the ML/TF risk posed by those business models and delivery channels, including risks derived from illegal operators,” the report noted.
With crypto used for payments, in-game purchases, and peer-to-peer transfers, criminals have found new ways to launder funds and mask the source of illicit gains. FATF plans to continue its assessment of this convergence between gaming and virtual assets as part of its broader risk monitoring efforts.
Compliance Lagging Despite Legal Advances
Despite some signs of progress, the report reveals that full compliance remains rare. Only one jurisdiction has been deemed fully compliant with Recommendation 15. About 29 percent were found to be “largely compliant,” while 49 percent were “partially compliant,” and 21 percent not compliant at all.
The FATF highlights ongoing challenges, including weak licensing and registration systems, difficulties regulating offshore and decentralized finance (DeFi) platforms, and the inability to identify entities or individuals behind VASP activities. In some cases, jurisdictions are requiring offshore providers or DeFi arrangements to be licensed, but gaps in oversight persist.
The organization noted that approximately 98 percent of global virtual asset activity takes place within its Global Network of jurisdictions, many of which still lack the necessary tools, political support, or expertise to fully operationalize AML/CFT protections.
The FATF’s update includes a comprehensive table detailing jurisdiction-by-jurisdiction progress and credits industry contributors such as Chainalysis, TRM Labs, Lukka Inc., and Merkle Science for data that informed its findings.
Sources:
Targeted Update on Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service Providers, fatf-gafi.org, June 26, 2025.
