A new report from the Financial Action Task Force (FATF) warns that rapidly growing stablecoins and unhosted wallet P2P transfers are increasingly exploited for money laundering, terrorist and proliferation financing, urging stronger global AML/CFT controls

The Financial Action Task Force (FATF) has released a targeted report warning that rapidly growing stablecoin use and peer‑to‑peer (P2P) transfers via unhosted wallets are increasingly exploited for money laundering, terrorist financing, and proliferation financing, and that most jurisdictions still lack adequate, tailored regulation for these risks. FATF urges countries to fully implement and enforce its virtual asset standards (especially Recommendation 15) and to impose stronger, risk‑based AML/CFT controls on stablecoin issuers, intermediaries and related service providers. According to the report, criminals and state‑linked cyber actors are leveraging stablecoins because their price stability, liquidity and interoperability make them attractive for moving value, including across borders, while P2P transfers via unhosted wallets bypass regulated intermediaries such as exchanges and other Virtual Asset Service Providers (VASPs). The absence of a regulated middleman in unhosted‑wallet P2P flows is identified as a primary vulnerability, as it weakens traditional customer due diligence, transaction monitoring and sanctions screening controls. FATF also flags challenges around cross‑chain activity, where criminals use bridges and multiple networks to obscure transaction trails, complicating investigations and supervisory oversight. The report calls on countries to ensure that stablecoin issuers and other participants in stablecoin arrangements are clearly brought within AML/CFT regimes and subject to obligations such as customer due diligence, transaction monitoring, and sanctions compliance. Recommended “good practices” include requiring issuers to implement risk‑based technical and governance controls (for example, the ability to freeze, burn, or withdraw tokens in secondary markets; restricting transfers to pre‑approved addresses; and blocking high‑risk addresses), strengthening the technical capabilities of supervisors and law enforcement (including cross‑chain analytics and blockchain forensics), enhancing domestic and international cooperation frameworks, and expanding public‑private partnerships focused on detecting and disrupting stablecoin‑related illicit finance. The report is positioned as both a warning and a practical playbook for regulators and industry as stablecoins become more embedded in the global financial system. "entities":["Financial Action Task Force (FATF)","stablecoins","unhosted wallets","peer-to-peer (P2P) transactions","Virtual Asset Service Providers (VASPs)","Recommendation 15 (FATF Standards)","Tether (USDT)","Financial Intelligence Analysis Unit (FIAU Malta)","law enforcement authorities","supervisory authorities"]}`

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More coverage

• BREAKING NEWS: FATF Issues Stablecoins Warning - ACAMS (acams.org)
• FATF Targeted Report on Stablecoins and Unhosted Wallets - FIAU (fiaumalta.org)
• FATF Releases the 'Special Report on Stablecoins and Non ... (binance.com)

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