FATF

The FATF, or Financial Action Task Force, is an intergovernmental body that sets global standards for combating money laundering and terrorist financing. It does not pass laws itself; instead, it issues recommendations that member countries are expected to implement in national legislation, and it evaluates countries against those standards, placing weak performers on public watchlists.

The FATF shaped crypto regulation worldwide when it extended its standards to virtual assets, coining the term virtual asset service provider (VASP) for businesses like exchanges and custodians and recommending they be licensed, apply KYC, and follow the Travel Rule for transfers between platforms. For example, a country updating its laws to require crypto exchange registration and customer identification is typically doing so to comply with FATF recommendations, because falling short can land a country on the FATF's "grey list," which raises the cost of doing business with the global financial system.

A common misconception is that the FATF regulates crypto companies directly; it has no enforcement power over firms and works only through national governments that adopt its standards. This indirect mechanism explains why crypto compliance rules look broadly similar across many countries, KYC, transaction monitoring, and information sharing among them, while details such as thresholds and treatment of self-custody wallets still differ by jurisdiction.