Underground money-transfer networks are increasingly using digital payments, fintech platforms and virtual assets to move and conceal illicit funds, with a case involving Pakistan showing how such systems are adapting to new technology, according to a joint report by the Financial Action Task Force (FATF) and the Organisation for Economic Cooperation and Development (OECD).
The report draws on information from more than 45 jurisdictions and organizations, including Pakistan and India. It found that underground banking networks have evolved from informal operations into organized and commercially run businesses.
More than 80% of reporting jurisdictions identified hawala and similar providers as major channels or methods used by professional money launderers.
One case highlighted by the report involved an underground money-transfer network operating between Oman and Pakistan.
Omani authorities identified a WhatsApp group allegedly used by hawaladars to advertise foreign exchange and remittance services to expatriates. Customers made payments through cash or mobile-linked transfers, while operators used digital wallets to settle transactions with counterparts in Pakistan.
The network offered lower exchange rates and little or no fees. It also used digital payment systems, including Raast, to transfer funds to Pakistan.
Authorities identified six suspected individuals connected to the network and recorded transactions worth around $72,293 over a one-year period.
The FATF and OECD said the use of technology by underground financial networks is becoming increasingly widespread, with nearly 70% of respondents reporting the use of new technologies.
These include encrypted messaging services, bank accounts, mobile wallets, fintech applications, instant payment systems and virtual assets such as stablecoins.
The report also pointed to the growing use of AI-powered tools and purpose-built applications for underground money transfers, warning that such technology can make illicit financial operations faster, harder to detect and easier to expand internationally.
Professional money laundering networks are also increasingly exploiting the formal financial system, using bank accounts, payment service providers, virtual IBANs, prepaid cards and virtual asset wallets.
The report identified lawyers, accountants, auditors, corporate service providers, financial consultants, real estate agents and casinos among the businesses and professionals that can potentially facilitate such activity.
The FATF and OECD said underground banking is increasingly being used to move proceeds from crimes beyond traditional activities such as drug trafficking and smuggling. These include fraud, cybercrime, terrorist financing, illegal gambling and organized crime.
Most jurisdictions treat unregistered underground banking and similar services as criminal activities and require such businesses to be licensed or registered.
The report called for stronger detection and enforcement measures, closer cooperation between governments and the private sector, greater international coordination and clearer regulations while ensuring legitimate users continue to have access to financial services.
