FATF flags hawala and underground banking as top laundering channels

What happened

The Financial Action Task Force (FATF), the global standard setter for anti-money laundering (AML) and counter-terrorist financing rules, published a new report on September 3, 2026. It covers underground banking, hawala, and other similar service providers, a category the report calls HOSSPs. The focus is professional money laundering.

More than 80% of reporting jurisdictions named underground banking and hawala systems among their principal channels or techniques for professional money laundering. In some cases, investigators traced more than EUR 500 million laundered through these schemes within a few months. FATF ties these figures to a clear professionalization trend.

Modern HOSSP networks now function as money laundering as a service, FATF found. They run as business-like, scalable, and commercially operated cross-border networks. These networks offer lower commission rates and rapid, large-volume value transfer to organized crime groups.

Nearly 70% of respondents also reported a shift toward digital hawala. Operators now coordinate transnational transfers through encrypted messaging apps, including WhatsApp, Telegram, and Signal. The shift makes these networks faster to use and harder to trace.

Why it matters

The scale FATF describes should register with practitioners immediately. In this analysis, when more than 80% of jurisdictions flag the same channel, underground banking has moved from a regional problem to a structural weakness in the global financial system. It is not an isolated blind spot limited to a handful of countries.

Hawala and similar systems have long carried dual risk, serving both money laundering and, potentially, terrorist financing (TF), since the same off-book value transfer method works for either purpose. In this analysis, FATF’s report centers on money laundering, but the underlying mechanics, including informal ledgers, trust-based networks, and the absence of a cross-border wire trail, are the same ones counter-TF programs monitor. Treating this purely as an AML issue risks missing half the picture.

The shift to encrypted coordination complicates detection further, in this analysis. Transaction monitoring systems built for wire transfers and correspondent banking rarely see hawala-style value transfer at all. A nearly 70% shift toward app-based coordination suggests this gap already existed, rather than creating a new one.

Practitioner angle

Financial crime teams should treat this report as a prompt to review, not panic.

• Update typologies: add hawala and underground banking indicators from the FATF report to transaction monitoring scenarios and red flag libraries, instead of relying only on wire-based rules.
• Reassess remittance and cash-intensive exposure: where customers or corridors touch jurisdictions handling high hawala volumes, revisit enhanced due diligence triggers this quarter.
• Brief the TF team, not just AML: since hawala risk spans both anti-money laundering and counter-terrorist financing programs, share the report with sanctions and TF colleagues directly.
• Watch for money laundering as a service patterns: log any customer behavior matching outsourced, commission-based laundering, and escalate through existing suspicious activity reporting channels.

The single most important step this week is to map the FATF report’s underground banking and hawala indicators against your existing typology library and route any gaps to your AML governance committee for review.