Hawala as a Hub for Money Laundering: PPATK Issues Warning to Users

A report from the Financial Action Task Force (FATF) has revealed that Hawala and other similar service providers (HOSSPs) are being utilised for illicit purposes. While this money transfer system can be used for legitimate purposes, many cases involve its use for money laundering.

The report notes the role of underground banking and HOSSPs in facilitating illegal fund flows. In many countries, service providers are required to obtain licences or register before providing services. However, many providers have been found to be operating without official registration. At least 80% of jurisdictions reported identifying such systems as one of the primary channels or techniques used in professional money laundering.

Quoting the official PPATK website, the FATF highlighted that underground banking systems and HOSSPs function similarly to business structures. They are described as having become highly sophisticated, operating on a large scale, and being managed commercially.

Criminal groups benefit from this system as it allows them to move large sums of money across borders quickly and with lower commissions. The objectives of this money laundering are diverse, ranging from narcotics trafficking and smuggling involving cash to crimes such as fraud, cybercrime, terrorism financing, illegal gambling, and transnational organised crime.

This system is now evolving into what is known as ‘digital hawala’. The practice involves the use of digital applications in the process of laundering money. For instance, encrypted messaging applications such as WhatsApp, Telegram, and Signal are used for coordination, while transactions are conducted via bank transfers, digital wallets, fintech applications, or instant payment systems.

Stablecoins or other virtual assets are also being utilised as balances in these transactions. The FATF also reported the involvement of AI-based tools in these activities, alongside the development of specialised applications.

“These various developments further increase the efficiency of professional money laundering services, making it easier to hide funds, expanding geographical reach, and increasing the resilience of professional money laundering networks based on underground banking and HOSSPs,” wrote PPATK, as cited on Friday (11/09/2026).