Digital hawala is creating new challenges for financial institutions seeking to detect money laundering and terrorist financing, according to analysis from financial crime technology provider ZIGRAM, as informal value-transfer networks increasingly use digital communication, payment services and virtual assets to move value beyond the visibility of individual institutions.
ZIGRAM’s analysis highlights findings from a September 2026 assessment by the Financial Action Task Force (FATF), which found that nearly 70% of respondents had identified new technologies being incorporated into underground banking and hawala-related activity. The findings underline how established financial crime risks are evolving alongside digital payment infrastructure.
Hawala operates through intermediaries who arrange for equivalent value to reach a recipient while settling their own obligations separately, using mechanisms such as cash, trade and netting. Rather than requiring a corresponding bank transfer for every customer instruction, the system relies on trust and relationships between operators. Although hawala can support legitimate remittance needs, including transfers made by migrant workers, its networks can also be exploited for financial crime.
Digital tools are changing how these arrangements operate. Messaging applications can facilitate communication between intermediaries, while bank transfers, mobile wallets, FinTech applications and instant payments provide ways for customers to initiate transactions. Virtual assets, including stablecoins, may also be used to settle balances between operators. These developments can increase the speed and reach of networks, with some transfers completed within hours.
For banks, FinTechs, digital asset platforms, insurers and capital markets firms, the central challenge is that visible payment records may reveal only part of the activity. An institution might see money entering and leaving a customer account without having access to the separate settlement arrangements between intermediaries. A transaction that appears domestic may also form part of a wider cross-border arrangement.
Information gaps create another obstacle. Investigators may have access to internal account records, customer information and payment messages, but lack records held by other institutions or reliable information about the identity behind a wallet. Connecting transactions and identifying relationships can help build a clearer picture, provided investigators distinguish verified evidence from assumptions.
Potential warning signs include incoming funds moving rapidly to other accounts, payments collected from numerous apparently unrelated individuals, several accounts repeatedly sending money to common recipients, and turnover that does not fit a customer’s known financial profile. Repeated movement between fiat currency and virtual asset services may also warrant scrutiny, as can shared identifiers connecting accounts already considered suspicious.
These patterns are indicators for further investigation rather than evidence of criminal activity in themselves. Similar behaviour can occur in legitimate businesses or money mule schemes, making customer context and supporting evidence essential to determining what is happening.
Improving detection therefore requires more than increasing the volume of alerts. Transaction monitoring should examine sequences of activity over time, including recurring counterparties and deviations from expected behaviour. Graph analytics can help investigators map relationships between accounts, businesses and beneficiaries, while assessing the reliability and relevance of each connection.
Where virtual asset activity has been established, blockchain analytics and appropriately obtained information from service providers may provide additional evidence. Investigators should not assume these tools can identify every wallet owner or reveal every off-chain settlement arrangement.
Financial institutions also need to document why activity warrants escalation. The US Financial Crimes Enforcement Network (FinCEN), in its guidance on informal value transfer systems, asks institutions to explain the basis for suspecting such an arrangement in suspicious activity report narratives. Effective investigations must distinguish observed transactions, verified relationships, customer explanations and unresolved questions.
ZIGRAM’s Complete FRAML System brings screening, transaction monitoring, entity intelligence and fraud monitoring together in a connected financial crime environment. The company’s approach is designed to help institutions assess activity across these functions by bringing available risk information and case-management workflows into a more joined-up investigative process.
ZIGRAM’s analysis highlights the importance of understanding the activity and relationships behind individual transactions, rather than relying on the payment record alone. As hawala arrangements adopt digital channels, financial institutions need to connect available intelligence, test alternative explanations and document why further action is justified, while clearly identifying where evidence remains incomplete.
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