The FATF has published a new report warning that underground banking, hawala and other similar service providers (HOSSPs) are increasingly being exploited by professional money launderers.
The report identifies underground banking and HOSSPs as a widespread global vulnerability, with more than 80% of reporting jurisdictions naming these systems among the principal channels or techniques used for professional money laundering.
In some instances, more than €500m has been laundered through underground banking and hawala-based schemes within just a few months. While such networks can be used for legitimate purposes, FATF notes that providing unlicensed underground banking or HOSSP services is a criminal offence in most countries and breaches FATF Standards, which call for these entities to be registered or licensed.
FATF’s findings point to a marked professionalisation of the sector, with underground banking and hawala networks increasingly structured as commercial operations offering “money laundering as a service”.
These sophisticated, scalable networks can move large volumes of value across borders quickly and cheaply for organised crime groups. The report also flags growing involvement from lawyers, accountants, auditors, notaries, corporate formation agents, financial consultants, real estate agents and casino or junket operators, alongside deeper integration with the formal financial sector, as launderers exploit bank accounts, FinTech platforms, payment service providers, virtual IBANs, prepaid cards and virtual asset wallets as entry and exit points.
Nearly 70% of respondents pointed to the rise of “digital hawala”, where operators coordinate via encrypted messaging apps such as WhatsApp, Telegram and Signal, customers move funds through mobile wallets, FinTech apps or instant payment systems, and virtual assets, including stablecoins, are used to settle balances. AI-based tools and purpose-built hawala apps have also been identified, developments that FATF says make illicit funds easier to conceal and strengthen the reach of these networks.
The report further shows that criminal use of these systems has expanded well beyond cash-based crime such as drug trafficking, now also covering fraud, cyber-enabled crime, terrorist financing, illegal gambling and transnational organised crime, illustrated through case studies including cross-border drug proceeds and terrorist financing via digital hawala networks.
FATF is the intergovernmental organisation that sets global standards for combating money laundering, terrorist financing and proliferation financing, working with more than 50 jurisdictions across its Global Network to identify risks and promote good practice among governments and the private sector.
Drawing on evidence from over 50 jurisdictions, the report calls for a combination of targeted prevention and enforcement measures alongside proportionate financial inclusion efforts, backed by legal clarity, stronger detection capabilities, public-private feedback loops, and domestic and international coordination.
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.”
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