FATF warns of risks from offshore crypto firms

FATF warns that offshore crypto firms and P2P transactions create regulatory gaps, enabling money laundering. The watchdog urges tighter rules, licensing, and global cooperation to address these risks.

The Financial Action Task Force (FATF) has issued warnings about major vulnerabilities in the global cryptocurrency sector, focusing on offshore virtual asset service providers (oVASPs) and peer-to-peer transactions. Offshore crypto firms often exploit regulatory gaps by operating across multiple jurisdictions, incorporating in one country while hosting infrastructure elsewhere. This fragmented approach creates enforcement blind spots, making it challenging for authorities to monitor transactions, enforce anti-money laundering (AML) and counter-terrorism financing rules, and assign regulatory responsibility. Criminals are leveraging these gaps to move illicit funds, launder money, and evade sanctions. The FATF highlights that fewer than half of countries regulate offshore crypto firms according to its standards. The organization urges nations to tighten regulations, require licensing for offshore providers, and strengthen international cooperation. Additionally, the FATF warns that peer-to-peer stablecoin transfers and non-custodial wallets could further undermine AML efforts. The watchdog calls for comprehensive risk assessments and the implementation of protective measures to address these emerging threats.