The criminal exploitation of informal money transfer networks is becoming an increasingly widespread global concern, according to a new warning from the Financial Action Task Force (FATF).
The international watchdog said that underground banking systems and other non-bank settlement methods are being increasingly used by professional money-laundering networks. Governments and private-sector organisations have been urged to strengthen efforts to identify and disrupt these illicit financial activities.
Informal systems, including hawala and similar service providers, can transfer money or other forms of value through networks of agents rather than traditional regulated financial institutions.
Criminal Networks Expanding Their Use of Informal Transfers
The FATF said the misuse of these alternative money transfer systems is now a significant international issue.
Historically, criminal networks primarily used such channels to move proceeds generated from cash-based crimes, including drug trafficking and smuggling. However, the range of criminal activity linked to these networks has expanded considerably.
According to the watchdog, illicit funds connected to fraud, cybercrime, terrorist financing, illegal gambling and gaming, and organised crime are increasingly being processed through informal financial networks.
The growing diversity of criminal activity highlights the evolving challenges facing international efforts to combat money laundering and illicit finance.
Professional Services Increasingly Linked to Money Laundering Schemes
The report also highlighted the increasing professionalisation of underground financial networks.
Professionals such as lawyers, accountants, auditors, consultants and real estate agents may be involved in facilitating or supporting complex money-laundering arrangements, according to information provided by FATF member countries.
Some criminal networks now operate with sophisticated business structures, making it more difficult for authorities to detect and dismantle them.
The watchdog called for stronger cooperation between governments, financial institutions and other private-sector organisations to improve the detection of suspicious transactions and professional money-laundering services.
Technology Making Underground Financial Networks More Complex
Rapid technological development is also changing the way informal money transfer systems operate.
Encrypted communications, financial technology platforms, anonymity-focused tools and the increasing use of cryptocurrencies and other emerging technologies can make illicit networks faster and more difficult to trace.
These developments may also help underground financial systems become more resilient and complex, creating additional challenges for law enforcement agencies and financial regulators.
The FATF stressed the importance of stronger international action as criminal organisations continue to adapt their methods and exploit new technologies to move illicit funds across borders.
