Hawala and other underground financial networks are becoming more sophisticated and are increasingly using virtual assets, fintech platforms and digital payment systems to move and conceal illicit funds, according to a joint report by the Financial Action Task Force (FATF) and the Organisation for Economic Cooperation and Development (OECD).
The report is based on input from more than 45 jurisdictions and organizations including Pakistan and India. It said underground banking networks had evolved into organized and commercially operated businesses.
More than 80 percent of reporting jurisdictions identified hawala and similar service providers as major channels or techniques used for professional money laundering.
The report highlighted a case involving a hawala network operating between Oman and Pakistan. Omani authorities identified a WhatsApp group used by suspected hawaladars to advertise foreign exchange and remittance services to expatriates. Customers paid through cash or mobile linked transfers, while operators used digital wallets to settle payments with counterparts in Pakistan.
The network offered cheaper rates and little or no fees, using digital payment channels including Raast to transfer funds to Pakistan. Authorities identified six suspected individuals linked to the network, with transactions of about $72,293 recorded over one year.
The FATF and OECD said the shift toward “digital hawala” was becoming widespread, with nearly 70 percent of respondents reporting the use of new technologies by underground financial networks. These include encrypted messaging platforms, bank accounts, mobile wallets, fintech applications, instant payment systems and virtual assets such as stablecoins.
The report also identified the emergence of AI based tools and purpose built hawala applications, saying these technologies can make money laundering operations faster, harder to detect and easier to expand across borders.
According to the report, professional money laundering networks are increasingly using the formal financial system as well, including bank accounts, payment service providers, virtual IBANs, prepaid cards and virtual asset wallets. Lawyers, accountants, auditors, corporate service providers, financial consultants, real estate agents and casinos were also identified as potential facilitators.
The report said illicit use of underground banking was no longer limited to traditional crimes such as drug trafficking and smuggling. Criminal networks are increasingly using these systems to move proceeds from fraud, cybercrime, terrorist financing, illegal gambling and organized crime.
The FATF and OECD said most countries treat unregistered underground banking and similar services as criminal activities and require such operators to be licensed or registered.
The report called for stronger detection and enforcement, better coordination between governments and the private sector, greater international cooperation and clear regulations while maintaining access to legitimate financial services.
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