The Financial Action Task Force has warned that digital technology is reshaping underground banking and hawala networks used in global money laundering operations. Its latest report says more than 80% of reporting jurisdictions identify underground banking and similar service providers as major channels for professional money launderers. In some investigated cases, more than EUR 500 million was allegedly laundered within months. FATF also highlighted the growing professionalisation of laundering services and the use of banks, fintech platforms, virtual IBANs, prepaid cards and virtual asset wallets.
FATF Warns of Rising Digital Hawala Networks in Global Money Laundering Operations
A new report by the Financial Action Task Force warns that new technologies are reshaping illicit financial activity around the world, noting the increasing use of digital hawala, underground banking and cross-border money laundering networks.
Criminal networks are using sophisticated technology to move illicit funds across borders, the Financial Action Task Force (FATF) said, highlighting the rapid growth of digital hawala and underground banking systems.
In its latest report published on Thursday, the FATF said underground banking, hawala and other similar service providers (HOSSPs) continue to play a major role in facilitating money laundering, terrorist financing and other financial crimes.
In some of the cases investigated, over EUR 500 million was laundered through underground banking and hawala-based schemes within a few months alone, the report said, underlining the scale of the threat.
The global anti-money laundering watchdog said more than 80 per cent of reporting jurisdictions identified underground banking systems and HOSSPs as among the primary channels used by professional money launderers.
Some HOSSPs may have legitimate remittance and financial transfer functions, but unregistered or unlicensed underground banking services are typically criminal offenses in many jurisdictions, FATF said.
FATF Report Highlights Professionalisation of Money Laundering Networks
The report notes that underground banking and hawala networks have moved beyond traditional informal transfer systems and are increasingly linked to professionalized “money laundering as a service” operations.
Criminal organizations are now subcontracting the financial concealment activities to specialist operators that act as commercial service providers in sophisticated international laundering networks, FATF states.
The report also says the networks are becoming more business-like, with lower commission rates but still enabling organized crime groups to move large amounts of money quickly across countries.
FATF also noted the increasing involvement of professionals and intermediaries in facilitating illicit financial flows. These include lawyers, accountants, auditors, notaries, corporate formation agents, financial consultants, real estate agents, casinos and junket operators.
Increased integration between underground financial networks and the formal financial sector has created new vulnerabilities for regulators and law enforcement agencies globally, the watchdog said.
Reports suggest that professional money launderers use bank accounts, fintech platforms, payment service providers, virtual International Bank Account Numbers (IBANs), prepaid cards and virtual asset wallets as entry and exit points in laundering cycles.
Also Read: Trump Signs Stopgap Funding Bill to Keep US Government Open Until Dec. 11
Digital Hawala and New Technologies Expand Criminal Reach
The FATF report points to the rise of “digital hawala,” a technology-enabled adaptation of traditional hawala systems that are increasingly reliant on encrypted communications and digital payment infrastructure.
The FATF’s survey of respondents found that nearly 70 per cent of respondents identified the increasing use of new technologies in underground banking systems, indicating a major shift to digitally enabled operations.
The report said that operators are using encrypted messaging applications such as WhatsApp, Telegram and Signal to coordinate transactions and communicate with customers across multiple jurisdictions.
Customers are increasingly using bank transfers, mobile wallets, fintech apps and instant payment systems to initiate transfers, which are less reliant on traditional cash-based mechanisms.
FATF also identified that virtual assets, including stablecoins, were used to settle balances between operators. The report also cited AI-based tools and purpose-built hawala apps designed specifically for underground financial activity.
These technological advances make professional money laundering networks that operate across international borders more efficient, secretive and resilient, the watchdog says.
The Financial Action Task Force (FATF) findings suggest that the criminal exploitation of these systems has far exceeded drug trafficking and smuggling, reported Animesh Singh for Tribune News Service.
Underground banking networks are increasingly linked to fraud, cyber-enabled crime, terrorist financing, illegal gaming, gambling operations and transnational organized crime, the report says.
FATF operational case studies demonstrate how professional laundering networks exploit underground banking systems to transfer the proceeds of large-scale cross-border drug trafficking and, in some instances, fund members of terrorist organizations via digital hawala channels.
The findings underscore the increasing challenge that governments, regulators and financial institutions face as emerging technologies continue to change the illicit finance landscape around the world. Tackling these evolving threats will continue to require increased regulation, licensing requirements and cooperation between countries, FATF said.
