Underground banking and hawala networks have emerged as major channels for professional money laundering worldwide, with some schemes moving more than EUR 500 million within a few months, according to a new report by the Financial Action Task Force (FATF). The global anti-money laundering watchdog said on Thursday that criminal misuse of underground banking and hawala and other similar service providers (HOSSPs) had become a “widespread global phenomenon”. More than 80 per cent of jurisdictions that reported to the FATF identified such systems among the principal channels or techniques used by professional money launderers. The report, based on evidence from more than 50 jurisdictions across the FATF Global Network and partner organisations, found that these networks were becoming increasingly sophisticated, scalable and commercially organised.
‘Money laundering as service’
The FATF warned that underground banking and hawala networks were evolving into business-like structures capable of moving large volumes of illicit funds rapidly across borders at comparatively low commission rates. This has contributed to the emergence of “money laundering as a service”, under which criminals outsource the movement and concealment of illicit proceeds to specialists rather than building their own laundering infrastructure.
The networks are no longer primarily associated with cash-intensive crimes such as drug trafficking and smuggling. They are increasingly being used to launder proceeds from fraud, cyber-enabled crime, illegal gaming and gambling and transnational organised crime, as well as to facilitate terrorist financing.
The watchdog also flagged growing involvement of professional intermediaries, including lawyers, accountants, auditors, notaries, corporate formation agents, financial consultants, real estate agents, casinos and junket operators. Professional money launderers are simultaneously becoming more integrated with the formal financial system, using bank accounts, fintech platforms, payment service providers, virtual IBANs, prepaid cards and virtual-asset wallets as entry and exit points while exploiting regulatory gaps.
Rise of digital hawala
Technology is also transforming the traditional hawala model. Nearly 70 per cent of respondents identified greater integration of new technologies and a shift towards what the FATF described as “digital hawala”.
Operators are increasingly using encrypted messaging platforms such as WhatsApp, Telegram and Signal to coordinate transactions. Customers can initiate transfers through bank accounts, mobile wallets, fintech applications and instant-payment systems, while operators are also using virtual assets, including stablecoins, to settle balances.
The FATF said authorities had even identified AI-based tools and purpose-built “hawala apps” being used within such networks.
These technologies can make professional laundering operations faster, harder to detect and capable of operating across wider geographical areas.
While hawala and similar services can serve legitimate remittance and value-transfer needs, the FATF noted that underground banking or unregistered HOSSP operations are generally criminal offences in most countries. FATF standards recommend that such service providers be licensed or registered.
FATF President Giles Thomson warned that sophisticated cross-border laundering networks represented a “serious risk multiplier” by making it easier for criminals to conceal activities that harm communities.
The report called for stronger coordination between governments and the private sector, improved detection capabilities, greater international cooperation and targeted enforcement to identify and dismantle the financial infrastructure supporting organised crime, corruption, fraud and terrorist financing.