The Financial Action Task Force's (FATF) 7th targeted update on virtual assets delivers an unambiguous message to the global crypto industry: while jurisdictions worldwide have made progress adopting regulations, enforcement is lagging behind. As criminal networks scale with AI and pioneer new evasion tactics, the FATF makes clear that paper-only compliance will no longer suffice.

• Laws are outpacing enforcement across jurisdictions, from Travel Rule legislation to VASP licensing regimes. The FATF is now signaling that regulators must move from adoption to active enforcement to close the gap.
• Freeze-resistant stablecoins represent a risk, with criminal networks now issuing their own stablecoins marketed as immune to asset freezing, specifically designed to undermine the programmable controls regulators have relied upon.
• Illicit activity is converging, with organized crime, fraud, DPRK proliferation financing, terrorist financing, and sanctions evasion increasingly sharing infrastructure. AI is accelerating every stage, from deepfake-powered identity fraud to automated attacks on blockchain-based applications.
• The FATF explicitly listed wallet screening, blacklisting/whitelisting, blockchain analytics tools, and freezing capabilities as expected components of a compliant AML/CFT framework.

Read our full analysis here.

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