Global Watchdog Flags Rising Criminal Use of Informal Money Networks

The global financial crime watchdog, the Financial Action Task Force (FATF), has issued a stark warning: criminal exploitation of informal money-transfer systems is no longer a regional issue but a widespread global phenomenon that is intensifying.

In a new report released on Thursday, the FATF highlighted the growing misuse of non-bank settlement methods, including hawala and other similar service providers. These networks operate by moving payments through agents rather than regulated financial institutions, placing them outside the traditional banking oversight framework.

The report notes that while such illicit networks were once primarily used to launder the proceeds of cash-based crime like drug trafficking and smuggling, their scope has broadened significantly. They are now also processing funds derived from fraud, cybercrime, terrorist financing, illegal gaming, and international organised crime.

A key concern raised in the report is the increasing involvement of professional service providers in facilitating these schemes. Member states contributing to the report identified lawyers, accountants, auditors, consultants, and real estate agents as being increasingly complicit in enabling such activity.

Furthermore, the FATF points to technological advancements as a major accelerant. Encrypted communications, fintech innovations, anonymity-enhancing tools, and the growing use of cryptocurrency have transformed these informal networks, making them faster, more opaque, and more resilient to disruption.

The overall picture painted by the FATF is one of a sector that has become increasingly professionalised. Some of these underground banking operations now function with the sophistication of legitimate businesses, presenting a complex and evolving challenge for governments and companies seeking to combat money laundering and terrorist financing.