FATF warns hawala and underground banking fuel global laundering
The Financial Action Task Force warned on September 3, 2026, that underground banking, hawala and other similar service providers have become important channels for professional money laundering worldwide.
More than 80% of reporting jurisdictions identified underground banking or similar providers among the principal professional money-laundering channels or techniques, according to the FATF report released in Paris. The report draws on evidence from more than 50 jurisdictions across the FATF Global Network and partner jurisdictions.
The report does not create a new binding global law or announce a new enforcement action. It presents findings, criminal typologies and good practices for governments, law-enforcement agencies and private financial firms.
What underground banking and hawala mean
Underground banking and hawala are informal, decentralized systems for transferring value. Depending on the region and operator, they can help people send remittances or make payments, including in places where formal banking services are limited. Transfers may be settled through agents, trade, cash or other non-bank arrangements.
The FATF does not treat all hawala or similar services as criminal. Its concern is that unregistered or underground operators can be exploited by professional money launderers and other criminal groups. The report notes that, in most countries, providing underground banking or unregistered similar services is generally a criminal offense and conflicts with FATF standards recommending licensing or registration.
Why the networks are changing
The FATF said some underground banking and hawala networks are increasingly professionalized and operate like commercial money-laundering services. In the report’s terminology, “professional money laundering” and “money laundering as a service” describe specialized criminal infrastructure that can move value across borders for a fee.
Nearly 70% of respondents identified the integration of new technologies and the growth of what the report calls “digital hawala.” The tools cited include encrypted messaging, mobile wallets, fintech applications, instant-payment systems, stablecoins, virtual-asset wallets, artificial-intelligence tools and purpose-built hawala applications.
The report also describes connections with the formal financial sector. Professional money launderers may use bank accounts, payment-service providers, virtual IBANs, prepaid cards and virtual-asset wallets as entry or exit points in laundering cycles, exploiting gaps between institutions and jurisdictions. That means illicit finance is not limited to cash couriers or offshore shell companies; it can also move through services used by legitimate customers and businesses.
Fraud is now part of the picture
The FATF said criminal use of these systems is no longer limited to cash-based crimes such as drug trafficking and smuggling. Its findings identify risks involving fraud, cyber-enabled crime, terrorist financing, illegal gaming and gambling, corruption and transnational organized crime.
That matters to consumers and businesses because fraud proceeds can use the same cross-border infrastructure that helps conceal money from other crimes. In a separate enforcement example, INTERPOL said Operation First Light 2026 ran from January 15 through April 30 across 97 countries and territories. Results published July 9 included 5,811 arrests and the interception of $293 million in illicit assets during an operation targeting social-engineering scams and associated money-laundering activity.
INTERPOL said authorities blocked bank accounts and virtual wallets and used its Global Rapid Intervention of Payments mechanism to stop illicit flows involving traditional and virtual assets. The operation identified more than 142,000 victims, illustrating how fraud-linked financial crime can affect individuals, companies and governments across borders.
What regulators are being urged to do
The FATF called for clearer legal requirements, licensing or registration where appropriate, stronger detection and investigation, and better cooperation between governments and private financial platforms. It also emphasized cross-border information-sharing and proportionate measures that preserve legitimate access to remittance services.
For banks, fintech companies and virtual-asset firms, the practical challenge is tracing value across several systems rather than treating informal transfers as separate from formal finance. For legitimate remittance users, the report does not make hawala inherently unlawful. It highlights the need to distinguish lawful community-based payment services from criminal operators using similar methods to move or conceal illicit proceeds.
Sources
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