FATF says informal money transfer networks are being used more often for criminal purposes

The Financial Action Task Force (FATF) says abuse of informal, non-bank settlement methods has become a “highly widespread global phenomenon” and is now tied not only to cash-based crime but also fraud, cybercrime, terrorism financing, illegal gambling, and international organized crime. For high-risk PSPs, the point is simple: the old “cash in, cash out” picture no longer covers the problem.

1. The FATF, the global anti-money laundering and counter-terrorism financing body, said on Thursday that criminal use of informal banking networks is a growing worldwide problem. Its report focuses on non-bank settlement methods, including hawala and other similar service providers (HOSSP), which move payments through agents rather than regulated financial institutions.
2. According to the report, these networks were once used mainly to launder proceeds from cash-based crimes such as drug trafficking and smuggling. They are now also used to process funds from fraud, cybercrime, terrorism financing, illegal gambling, and international organized crime.
3. The FATF also said professional service providers are increasingly involved in enabling these schemes, including lawyers, accountants, auditors, consultants, and real estate agents, based on input from member states that contributed to the report.
4. Encrypted communications, fintech, anonymity-enhancing tools, and the growing use of cryptocurrencies and other new technologies have changed informal money transfer networks, making them faster, more opaque, and more resilient, the report said.
5. The report adds that underground banking and HOSSP-based money laundering have become more professionalized, with some operations running like sophisticated businesses. That matters for PSPs and acquirers because the risk is no longer limited to obvious underground operators; the infrastructure can look more organized and more embedded in legitimate services.