New Delhi: Traditional hawala channels, including the movement of funds in cash and their reaching the ultimate beneficiary through face-to-face interactions, are giving way to digital technologies in the vast majority of cases, the Financial Action Task Force (FATF) has said in a report on emerging trends in money-laundering.
The global watchdog against illicit financial transactions said that the operators are now relying on a combination of digital services—including encrypted messaging, cloud storage, social media, lending applications, and gaming platforms—to manage customer onboarding, co-ordination, and settlement.In its latest report, titled ‘Investigating Professional Money Laundering, Underground Banking, and the Use of Hawala and Other Similar Service Providers’, the financial watchdog said that the hawala network has been shifting towards what it defined as ‘digital hawala’, which involves, in some capacity, the role of digital technologies.
The FATF defines digital hawala as the use of digital technologies to facilitate the co-ordination, execution, settlement, or concealment of a funds transfer through hawala or other informal mechanisms, including the use of digital communication tools between the operators involved and reliance on digital payment systems, such as cryptocurrencies, for the movement of funds.“One of the most significant developments identified in the report is the digital transformation of underground banking and Hawala and Other Similar Service Providers (HOSSP) activity, including the use of digital technologies to facilitate the co-ordination, execution, settlement, or concealment of informal value transfer, including for PML (professional money-launderers),” the FATF said in its report.The anti-money laundering watchdog observed that this rapid digital transformation of hawala networks and the money-laundering system would increase the speed and opacity of illicit networks, thereby expanding the geographic reach and network of hawala networks.
