The Financial Action Task Force (FATF) has warned that traditional underground banking and hawala networks are increasingly adopting digital technologies, creating new risks for money laundering and terrorist financing.
In its latest report on professional money laundering, underground banking and Hawala and Other Similar Service Providers (HOSSPs), the global financial crime watchdog said nearly 70% of responding jurisdictions had observed the integration of new technologies into these networks.
Technology Is Reshaping Underground Financial Networks
According to FATF, underground banking and hawala networks are evolving into increasingly sophisticated and commercially organised operations. Digital communication platforms, fintech services, mobile wallets and virtual assets can create additional channels through which illicit financial networks move and settle value.
The report notes that virtual assets, including stablecoins, are being incorporated into some underground banking arrangements. FATF also identified the use of artificial intelligence and purpose-built hawala applications as emerging developments.
For businesses and financial professionals, the development reinforces the importance of strong financial controls, transaction monitoring and accurate records. Robust auditing services in india can help legitimate businesses strengthen financial oversight and identify unusual transactions that require further review.
FATF Highlights Wider Money-Laundering Risks
FATF said underground banking and HOSSPs have become important channels for professional money laundering. More than 80% of reporting jurisdictions identified such systems among significant professional money-laundering channels or techniques.
The report also points to increasing connections between informal financial networks and the formal financial system. Bank accounts, fintech platforms, payment service providers, virtual IBANs, prepaid cards and virtual-asset wallets can potentially be exploited as entry or exit points in illicit financial transactions.
At the same time, FATF emphasised that hawala and similar services can have legitimate uses, particularly for remittances and value transfers. The concern is the exploitation of these systems by criminal actors and professional money-laundering networks.
Global Response Needs Stronger Detection
FATF's findings are based on information from more than 50 jurisdictions across its global network and partner organisations. The report calls for stronger capabilities to detect, investigate, prosecute and disrupt professional money-laundering infrastructure.
The watchdog recommends a combination of targeted enforcement, clearer legal frameworks, stronger detection systems, cooperation between public authorities and the private sector, and international coordination.
Why the ‘Digital Hawala’ Trend Matters
The growing use of technology means that financial crime networks can potentially operate across borders with greater speed and sophistication. This makes traditional monitoring approaches increasingly important to update alongside emerging payment technologies.
FATF's findings highlight a broader challenge for regulators and financial institutions: ensuring that technological innovation in payments does not create gaps that criminals can exploit.
Source attribution: Based on the supplied The Hindu report and the FATF report Investigating Professional Money Laundering, Underground Banking, and the Use of Hawala and Other Similar Service Providers, published September 3, 2026.