FATF Strongly Urges Operational Implementation and Enforcement

The Financial Action Task Force (FATF) published its sixth annual Targeted Update on Implementation of the FATF Standards on VAs and VASPs (Update) for 2025, providing a review of implementation of the standards including the Travel Rule and an update on emerging risks and market developments. As the criminal landscape reaches new levels of sophistication, the FATF is urging countries to accelerate operational implementation and enforcement. The FATF’s complete assessment covers 163 jurisdictions that responded to the survey out of a total of 205 and provides detailed guidance for both public and private sectors on addressing implementation challenges.

The updated table of jurisdictions with “materially important VASP activity” now covers 75 jurisdictions representing approximately 98% of the global virtual asset market. The FATF Update calls for an immediate focus on effective regulation as these key jurisdictions are critical to global financial security.

The criminal landscape has fundamentally shifted. Most on-chain illicit activity now involves stablecoins, with an estimated $51 billion in fraud and scam activity in 2024 alone. The rise of “scam-as-a-service” operations and AI-enhanced fraud techniques represents a new level of criminal sophistication.

Recognition of offshore risks is growing, with 37% of jurisdictions now requiring offshore VASPs to be licensed, a significant expansion beyond traditional territorial approaches.

Decentralized Finance continues to challenge regulators. While 48% of advanced jurisdictions require certain DeFi arrangements to be licensed, 75% haven’t identified any unlicensed entities, indicating either effective compliance or regulatory blind spots.

Enforcement Gaps Across Both Licensing and Prohibition. Of jurisdictions requiring VASP licensing, 59% have never taken enforcement action for Travel Rule violations. Only 9 of 17 jurisdictions that fully prohibit virtual assets report taking actual enforcement actions.

Travel Rule Implementation Challenges

• Gaps in implementation still exist
• Countries that have implemented regulations must operationalize urgently (low number of enforcement actions)
• Effectiveness of the Travel Rule depends on consistent, effective and global implementation and enforcement

Publication of a Best Practices in Travel Rule Supervision paper (FATF/PDG(2025)18

• Counterparty VASP Due Diligence gap: There is a lack of shared understanding between regulators and VASPs about Travel Rule risks and the importance of conducting proper due diligence on counterparty VASPs, leading to weak risk assessments and inadequate compliance measures.
• Interoperability Challenge: Many VASPs use multiple Travel Rule systems to achieve compliance, but poor interoperability between tools creates data integration issues, and there are still tools with significant shortcomings. VASPs should prioritize compliant tools that reduce complexity and improve transaction capabilities.
• Phased Enforcement: Supervisors should conduct thematic reviews (desk-based or on-site) before enforcing Travel Rule compliance to assess VASP readiness and enable targeted remediation rather than immediate penalties.
• Examples of enforcement actions applied to VASPs in several jurisdictions: These actions are consistent with our observations across jurisdictions (as recently enacted in Singapore by MAS) as mutual evaluations also now include effectiveness of implementation.

Next Steps

The FATF’s roadmap for 2025–2026 includes targeted reports on stablecoins, offshore VASPs, and DeFi arrangements. The focus is shifting from building regulatory frameworks to operational implementation and enforcement.

FATF Updated Standards on Recommendation 16 on Payment Transparency

Earlier the same month, the FATF had published the FATF Updated Standards on Recommendation 16 on Payment Transparency following two iterations of public consultation.

Summary of the Updated Standards

• The payment chain begins with the financial institution which receives an instruction from the customer (in paragraph 6 of INR.16), and ends with the financial institution that services the account of the beneficiary or provides cash to the beneficiary.
• Additional Beneficiary information of Address (and where not available, town and country)
• Pre-validation, Confirmation of Payee (CoP) or Verification of Payee (VoP) where a system allows for it. We are of the opinion that this is a best practice that should be implemented for Virtual Assets Travel Rule compliance due to the immutable and immediate nature of blockchain transfers which makes returns particularly challenging.

These changes that will further improve payment transparency are expected to be implemented by 2030.

VerifyVASP’s Verified Network was architected specifically for CoP and VoP requirements, giving member VASPs the ability to future-proof their compliance today.