FATF Warns Offshore Crypto Firms Could Be Money Laundering, Sanctions Loopholes

The Financial Action Task Force (FATF) has warned in its latest report that cryptocurrency service providers (VASPs) operating offshore pose risks of money laundering, sanctions evasion, and other illicit financial activities. The report states: "As a result, effective international cooperation may not be possible, including with the relevant VASP regulator, thereby limiting the effectiveness of domestic risk mitigation measures." The regulator said the issue is particularly challenging because many offshore crypto firms operate in multiple jurisdictions. A company may be registered in one country, host infrastructure in another, and serve customers worldwide through an online platform, leaving regulators uncertain about which agency is responsible. **Regulators Struggle to Track Offshore Crypto** The FATF also said some countries struggle to identify offshore platforms providing services to local users. Without a local legal entity, authorities may have limited visibility into these businesses or the transactions they process. To address this issue, the FATF urged countries to strengthen the regulation of crypto firms in their markets, even if those firms are located abroad.

The FATF's survey found that 83% of jurisdictions require licensing or registration of cryptocurrency service providers. Source: FATF The organization recommended that governments require offshore VASPs to register or obtain a license when providing services to domestic users. It also called for enhanced cross-border cooperation between regulators and law enforcement agencies. **FATF Highlights Risks of P2P Stablecoin Transfers** The FATF said that as stablecoins expand into payments and cross-border transfers, this structure creates vulnerabilities in AML supervision. The regulator urged countries to assess the risks and introduce safeguards.