Rise of ‘digital hawala’ aiding money laundering, terror financing, global watchdog says

A centuries-old underground banking system is now transforming into a tech-enabled network, with virtual assets adding new layers to “digital hawala”. The shift is being exploited for purposes ranging from routine money laundering to, in some cases, financing terrorist organisations, the latest Financial Action Task Force (FATF) report said.

The global money laundering and terror financing watchdog’s report, titled “Investigating Professional Money Laundering, Underground Banking, and the Use of Hawala and Other Similar Service Providers”, identifies the fusion of virtual assets with the traditional “hawala” system as one of the most significant developments. According to the report, nearly 70% of surveyed jurisdictions have reported the integration of new technologies into such networks.

The study has flagged six forms of “digital hawala” — a term covering a spectrum of technologies that facilitate the coordination, execution, settlement, or concealment of transactions.