Key Takeaways
- Underground financial networks, including hawala, are increasingly using virtual assets and fintech platforms.
- AI-based tools and applications are making money laundering operations faster and harder to detect.
- The FATF report highlights the need for stronger detection and international cooperation.
A joint report by the Financial Action Task Force (FATF) and the Organisation for Economic Cooperation and Development (OECD) has highlighted the growing sophistication of underground financial networks, particularly in Pakistan and India. These networks, which include hawala, are now leveraging virtual assets, fintech platforms, and digital payment systems to move and conceal illicit funds.
According to the report, more than 80 percent of the 45 reporting jurisdictions identified hawala and similar service providers as major channels for professional money laundering. The FATF and OECD noted a specific case involving a hawala network operating between Oman and Pakistan, where suspected hawaladars used a WhatsApp group to advertise foreign exchange and remittance services.
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 such as Raast to transfer funds. Authorities identified six suspected individuals linked to the network, with transactions totaling approximately $72,293 over one year.
The report emphasized that the shift toward 'digital hawala' is 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.
Furthermore, the FATF and OECD highlighted the emergence of AI-based tools and purpose-built hawala applications, which can make money laundering operations faster, harder to detect, and easier to expand across borders. The report also noted that professional money laundering networks are increasingly using the formal financial system, 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 identified as potential facilitators. Illicit use of underground banking is 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 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. The report emphasized the need for countries to treat unregistered underground banking and similar services as criminal activities and require such operators to be licensed or registered.
