Abuses of informal money transfer networks - Technology is giving criminal groups new ways to hide funds
Criminal misuse of informal money transfer networks is becoming a global problem and is growing, warns the Financial Action Task Force (FATF), the international body that monitors the fight against money laundering and terrorist financing.
In a recently published report, the FATF highlights that non-bank money transfer systems, including hawala and other similar service providers, are being widely misused by criminal networks.
These systems operate through agents and intermediaries, rather than regulated financial institutions. Initially, they were used primarily to move and launder the proceeds of crimes that generated large amounts of cash, such as drug trafficking and smuggling.
But according to the FATF, criminal activity has expanded significantly. Informal networks are now also being used for fraud, cybercrime, terrorist financing, illegal gambling and international organized crime.
Another concern is the increasing involvement of professionals in such schemes. According to the report, lawyers, accountants, auditors, consultants and real estate agents can be used to facilitate or conceal transactions related to money laundering.
The FATF notes that technological developments have changed the way these networks operate. Encrypted communications, financial technology, tools that enhance anonymity, and the growing use of cryptocurrencies have given criminal groups new opportunities to move funds.
These tools make transfers faster and harder to detect, while informal networks have become more flexible and resistant to authorities' efforts to crack down on them. According to the FATF, underground banks and money transfer services outside the traditional financial system are becoming increasingly professionalized. Some of them now operate as sophisticated businesses, with structures and methods similar to those of legitimate organizations.
The report calls on governments and the private sector to strengthen measures against these schemes, by improving risk identification, supervision and cross-border cooperation. The FATF warns that the fight against money laundering cannot be limited to banks and traditional financial institutions, as criminal networks are increasingly moving towards alternative channels and technologies that provide anonymity.
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