PARIS, Sept 3 - The Financial Action Task Force has identified a growing international problem: the criminal misuse of informal banking arrangements that move funds outside regulated financial institutions.
In a report released on Thursday, FATF describes non-bank settlement mechanisms, such as hawala and other HOSSPs, as a "widespread global phenomenon." These systems route payments through networks of agents rather than through traditional, regulated banks.
Historically associated with cash-based crimes like drug trafficking and smuggling, these informal networks now handle funds originating from a wider array of illicit activities. The report says they are being used to process proceeds from fraud, cybercrime, terrorist financing, illegal gaming and gambling, and transnational organised crime.
FATF member states that contributed to the report noted a growing role for professional service providers in facilitating these schemes. Lawyers, accountants, auditors, consultants and real estate agents were specifically cited as increasingly involved in enabling or concealing the flow of illicit funds.
Technological developments have altered how these informal channels operate. Encrypted communications, fintech innovations, anonymity-enhancing tools and a rising use of cryptocurrencies and other new technologies have transformed underground money-transfer networks. According to the report, these tools can make informal transfers faster, more opaque and more resilient to detection.
The watchdog also highlights a trend toward professionalisation within underground banking. Some HOSSP-based operations now resemble sophisticated businesses in their structure and methods, the report says, potentially complicating regulatory oversight and enforcement actions.
Summary of findings
- Non-bank settlement methods including hawala and HOSSPs are widespread globally.
- Informal networks now move funds tied to a broader set of crimes, beyond traditional cash-based offenses.
- Professional advisors and modern technologies are increasingly used to facilitate and obscure illicit transfers.
Implications
The report signals growing challenges for regulators and the financial sector as informal transfer channels adopt technology and professional practices that increase speed and opacity. FATF member input underpins the assessment, reflecting observations from multiple jurisdictions.