Underground banking key channel for money launderers, watchdog warns

Oct 12, 2026

Criminal networks are paying specialists to launder their money through hawala and underground banking, with some schemes moving more than €500 million in a few months, according to a new FATF report.

Underground banking and hawala networks have become one of the main channels used by professional money launderers, the Financial Action Task Force (FATF) has found.

The global watchdog's report, published in Paris on 3 September 2026, found that in some cases more than €500 million was laundered through these schemes within just a few months.

More than 80% of reporting jurisdictions identified underground banking and hawala-type services among the principal professional money laundering channels they encounter.

The report draws on evidence from more than 50 jurisdictions.

"Money laundering as a service"

The FATF found that underground banking networks are increasingly run like commercial businesses.

They are sophisticated, scalable and cross-border, offering organised crime groups lower commission rates and the ability to move large volumes of value quickly.

The watchdog describes this as "money laundering as a service", in which criminals outsource laundering to specialists.

FATF President Giles Thomson called the emergence of these networks a serious risk multiplier.

He urged public and private partners to put the report's good practices into action to detect and disrupt them.

The report also warns of growing involvement by professional intermediaries. It names lawyers, accountants, auditors, notaries, company formation agents, financial consultants, real estate agents, and casinos and junket operators.

Launderers are increasingly using bank accounts, fintech platforms, payment service providers, virtual IBANs, prepaid cards and virtual asset wallets as entry and exit points, the FATF found, exploiting gaps between regulated sectors.

The rise of "digital hawala"

Nearly 70% of respondents identified new technology being integrated into these schemes, a trend the FATF calls "digital hawala".

Operators coordinate over encrypted messaging apps such as WhatsApp, Telegram and Signal.

Customers pay in through bank transfers, mobile wallets, fintech apps or instant payments. Brokers then settle balances between themselves using virtual assets, including stablecoins.

The report also identified AI-based tools and some purpose-built "hawala apps".

The crimes behind the money have broadened to.

Once linked mainly to cash-based offences such as drug trafficking, these channels now launder proceeds of fraud, cyber-enabled crime, terrorist financing, illegal gambling and transnational organised crime. One case study describes a digital hawala network used to finance members of a terrorist organisation.

Not inherently criminal

Hawala itself is a long-established way of transferring value across borders without the money physically crossing the border. Brokers in each country pay out locally and settle what they owe each other later.

The FATF stresses that hawala and other similar service providers, known as HOSSPs, can serve legitimate purposes. For many communities they offer a cheap, familiar way to send money home.

The risk lies in unregistered operators. FATF Standards require these providers to be licensed or registered, and in most countries running an unregistered service is generally a criminal offence.

Australian gatekeepers now in scope

The report's list of exploited professions closely mirrors the sectors Australia brought under its AML/CTF Act on 1 July 2026, under the tranche 2 reforms.

Lawyers, accountants, conveyancers, real estate agents, trust and company service providers, and dealers in precious metals and stones are now regulated when they provide designated services.

They must run an AML/CTF program, conduct customer due diligence, report suspicious matters and keep records.

The obligations apply to specified services, not to every activity those professionals undertake.