The Financial Action Task Force (FATF), which leads global action to tackle money laundering, terrorist and proliferation financing, in its latest report released on Thursday, has highlighted the growing role of underground banking, hawala and other similar service providers (HOSSPs) in facilitating illicit finance.It points out these systems’ vulnerability to money laundering and terrorist financing, with some cases involving more than EUR 500 million laundered through underground banking and hawala-based schemes within just a few months.The report finds that criminal misuse of underground banking and HOSSPs is a widespread global phenomenon, with more than 80 per cent of reporting jurisdictions identifying these systems among the principal professional money laundering channels or techniques.While HOSSPs can serve legitimate purposes, in most countries the provision of underground banking or unregistered HOSSP services is generally a criminal offence and is in contravention to the FATF standards which recommend that countries require these entities to be licensed or registered to provide such services, it further stated.The report highlights the manner in which underground banking and hawala networks have evolved and become increasingly associated with highly professionalised “money laundering as a service” — the systematic outsourcing of money laundering functions to specialists, and the emergence of professional money laundering as a commercialised business model.It points out how underground banking systems and HOSSPs are increasingly organised as business-like structures, with highly sophisticated, scalable, and commercially operated cross-border professional money laundering networks emerging. These offer lower commission rates and can move large volumes of value rapidly across borders for organised crime groups.FATF also warns of an increasing involvement of lawyers, accountants, auditors, notaries, corporate formation agents, financial consultants, real estate agents, and casinos and junket operators in facilitating such schemes.Increasing integration with the formal financial sector is also highlighted, as professional money launderers increasingly use bank accounts, fintech platforms, payment service providers, virtual IBANs, prepaid cards, and virtual asset wallets as entry and exit points in money laundering cycles, exploiting regulatory blind spots.Significantly the report underlines the rise of “digital hawala”, informing that nearly 70 per cent of respondents identified the integration of new technologies, with a growing shift towards so-called “digital hawala”.This includes operators using encrypted messaging applications (e.g. WhatsApp, Telegram, Signal) and digital tools to co-ordinate; customers initiating transfers through bank transfers, mobile wallets, fintech applications, or instant payment systems; operators using virtual assets, including stablecoins to settle balances between themselves; use of AI-based tools; and even the development of purpose-built ‘Hawala apps’ has been identified.All of these developments can accelerate the efficiency of professional money laundering services, make money easier to hide, and strengthen the geographic reach and resilience of underground banking, and HOSSP-based professional money laundering schemes.The findings demonstrate that the criminal use of these systems is no longer limited to cash-based crime such as drug trafficking or smuggling. Today, criminals are using these systems to launder proceeds from a broader spectrum of criminal economies including fraud, cyber-enabled crime, terrorist financing, illegal gaming and gambling and transnational organised crime.Through a series of operational case studies, the report shows how professional money laundering networks increasingly rely on underground banking systems, for example moving proceeds from large-scale cross-border drug trafficking or the use of a digital hawala networks to finance members of a terrorist organisation.