Council of Europe Warns of Virtual Asset Risks as Sanctions Evasion Concerns Grow

The report identifies a range of emerging risks associated with the misuse of virtual assets, including fraud, proliferation financing, and child exploitation.

RMN News Legal Desk
New Delhi | February 12, 2026

STRASBOURG – The Council of Europe’s anti-money laundering body, MONEYVAL, released a report on February 10, 2026, warning that more robust action is required to prevent virtual assets from being used to circumvent financial sanctions. While the report acknowledges significant progress in establishing regulatory frameworks, it highlights critical gaps in enforcement and the implementation of international standards.

Progress in Supervision and Regulation

The report, which updates a 2023 review, found that 90% of the 25 surveyed jurisdictions have now designated supervisory authorities for virtual assets. Additionally, 81% of these jurisdictions require virtual-asset service providers (VASPs) to be licensed or registered, reflecting a global trend toward bringing the crypto sector under formal oversight. International cooperation to combat financial crimes has also seen marked improvement.

Critical Gaps in Enforcement

Despite these regulatory strides, MONEYVAL identified several persistent challenges:

• Weak Enforcement: Authorities continue to struggle with taking action against unlicensed or unregistered operators.
• The “Travel Rule”: Implementation of the Financial Action Task Force (FATF) Recommendation 16—which requires the collection and transmission of originator and beneficiary information—remains incomplete, with only 46% of jurisdictions having operationalized the rule.
• Sanctions Evasion: A primary concern for MONEYVAL is the increasing use of virtual assets to evade targeted financial sanctions.

Emerging Threats and Data Challenges

The report identifies a range of emerging risks associated with the misuse of virtual assets, including fraud, proliferation financing, and child exploitation. Furthermore, many jurisdictions lack structured insights into cross-border virtual-asset flows due to ongoing data collection challenges.

A Call for Enhanced Capabilities

To address these vulnerabilities, MONEYVAL is urging jurisdictions to integrate sanctions and proliferation financing risks into their national assessments. The body also recommends improving the quality of suspicious activity reporting from the private sector and enhancing the investigatory capabilities of competent authorities.

MONEYVAL, which comprises 35 jurisdictions, remains the primary monitoring body for assessing compliance with international standards to counter money laundering and the financing of terrorism within its member states.