Paris [France], September 3 (ANI): A new FATF report published today highlights the growing role of underground banking, hawala and other similar service providers (HOSSPs) in facilitating illicit finance.
According to an official release, the report highlights these systems’ vulnerability to money laundering and terrorist financing, with some cases involving more than EUR 500 million laundered through underground banking and hawala-based schemes within just a few months.
The report finds that criminal misuse of underground banking and HOSSPs is a widespread global phenomenon, with more than 80% of reporting jurisdictions identifying these systems among the principal professional money laundering channels or techniques.
While HOSSPs can serve legitimate purposes, in most countries the provision of underground banking or unregistered HOSSP services is generally a criminal offence and is in contravention to the FATF Standards, which recommend that countries require these entities to be licensed or registered to provide such services.
The report highlights how underground banking and hawala networks have evolved and become increasingly associated with highly professionalised “money laundering as a service" – the systematic outsourcing of money laundering functions to specialists and the emergence of professional money laundering as a commercialised business model.
The report highlights how underground banking systems and HOSSPs are increasingly organised as business-like structures, with highly sophisticated, scalable, and commercially operated cross-border professional money laundering networks emerging. These offer lower commission rates and can move large volumes of value rapidly across borders for organised crime groups, the release added.
The FATF also warns of an increasing involvement of lawyers, accountants, auditors, notaries, corporate formation agents, financial consultants, real estate agents, and casinos and junket operators in facilitating such schemes. Increasing integration with the formal financial sector is also highlighted, as professional money launderers increasingly use bank accounts, fintech platforms, payment service providers, virtual IBANs, prepaid cards, and virtual asset wallets as entry and exit points in money laundering cycles, exploiting regulatory blind spots.
Nearly 70% of respondents identified the integration of new technologies, with a growing shift towards so-called “digital hawala”.
This includes operators using encrypted messaging applications (e.g., WhatsApp, Telegram, Signal) and digital tools to coordinate; customers initiating transfers through bank transfers, mobile wallets, fintech applications, or instant payment systems; operators using virtual assets, including stablecoins to settle balances between themselves; the use of AI-based tools; and even the development of purpose-built ‘Hawala apps’ has been identified, noted the release.
All of these developments can accelerate the efficiency of professional money laundering services, make money easier to hide, and strengthen the geographic reach and resilience of underground banking- and HOSSP-based professional money laundering schemes.
The findings demonstrate that the criminal use of these systems is no longer limited to cash-based crime such as drug trafficking or smuggling. Today, criminals are using these systems to launder proceeds from a broader spectrum of criminal economies, including fraud, cyber-enabled crime, terrorist financing, illegal gaming and gambling and transnational organised crime.
Through a series of operational case studies, the report shows how professional money laundering networks increasingly rely on underground banking systems, for example, moving proceeds from large-scale cross-border drug trafficking or the use of digital hawala networks to finance members of a terrorist organisation, the release highlighted.
FATF President Giles Thomson said, “This emergence of sophisticated, commercially operated cross-border money laundering networks is a serious risk multiplier, making it easier for criminals to cover up their activities that harm people and communities around the world. Whether through dedicated coordination channels or innovative investigative tools, I urge public and private partners around the world to put the good practices identified in this report into action to detect and disrupt this infrastructure that is sustaining organised crime.”
Drawing on evidence from more than 50 jurisdictions from across the FATF Global Network and partners, the report provides a global picture of how these systems operate and identifies good practices to help jurisdictions and the private sector strengthen their ability to detect, investigate, prosecute and disrupt professional money laundering infrastructure that enables serious and organised crime, corruption, fraud and terrorist financing, according to the release.
The findings highlight the importance of combining targeted prevention and enforcement measures with proportionate financial inclusion efforts, supported by legal clarity, enhanced detection capabilities, public-private feedback loops, domestic co-ordination and international co-operation. (ANI)
New FATF report finds underground banking and hawala are key channels for professional money launderers
