The Financial Action Task Force (FATF) published a report on offshore virtual asset service providers (oVASPs), warning that gaps in cross-border oversight are being exploited to facilitate large-scale fraud, money laundering and terrorism financing. It sets out good practices for authorities to identify oVASPs, bring them within anti-money laundering, counter-terrorist financing and counter-proliferation financing (AML/CFT/CPF) supervision through licensing or registration, and apply sanctions and market-disruption measures where providers remain non-compliant. The report defines oVASPs as providers established under the laws of one jurisdiction that serve customers in another, often without a meaningful local presence, and describes business models used to evade obligations and frustrate enforcement and international cooperation. It finds that 46% of jurisdictions have adopted an activity-based approach that applies licensing or registration based on the activities performed in-market regardless of where the oVASP is incorporated or located, with divergent national approaches creating scope for regulatory arbitrage and supervisory blind spots. FATF highlights typologies including dispersing victim funds across multiple addresses, layering through intermediary wallets, and using multiple blockchains and bridges, as well as the misuse of nested relationships where unlicensed offshore VASPs access services from licensed providers. Recommended measures include stronger domestic coordination (including inter-agency task forces and public-private partnerships), fuller use of supervisor-to-supervisor and FIU-to-FIU channels to speed information access and enforcement, and private-sector steps such as assessing exposure to unlicensed or unregistered oVASPs, applying consistent group-wide controls, and avoiding relationships with non-compliant providers; case studies cited include a VASP-linked wallet holding around USD 600 million in a Nigerian fraud analysis and UK enforcement and disruption measures that drove the takedown of more than 1,000 scam websites.
Financial Action Task Force 2026-03-11
Financial Action Task Force report recommends activity-based licensing and tougher enforcement for offshore virtual asset service providers
The Financial Action Task Force (FATF) released a report on offshore virtual asset service providers (oVASPs), highlighting exploitation of cross-border oversight gaps for fraud, money laundering, and terrorism financing. The report recommends identifying oVASPs, integrating them into AML/CFT/CPF supervision, and applying sanctions for non-compliance. It addresses regulatory arbitrage and supervisory challenges, urging stronger domestic coordination and private-sector vigilance against unlicensed oVASPs.