News: FATF has flagged the growing use of digital technologies in hawala networks → raising concerns over money laundering and terror financing.
What is Digital Hawala?
- Technology-enabled form of traditional informal hawala system → transfers value through intermediaries without necessarily using conventional banking channels.
- Uses encrypted messaging, fintech platforms, mobile wallets, virtual assets and AI tools.
How it Works
- Customer provides funds → hawala operator sends instructions through digital platforms.
- Recipient receives equivalent value through cash, wallets, fintech platforms or virtual assets.
- Operators later settle balances through cash, trade, formal payment systems or crypto-assets.
Key FATF Findings
- 70% of surveyed jurisdictions → reported use of new technologies in underground banking networks.
- Virtual assets → stablecoins and cryptocurrencies increasingly used for settlement.
- AI tools → can make transaction structuring and mule-account routing harder to detect.
- Cash remains important → digitalisation supplements rather than replaces traditional hawala.
Concerns
- Money laundering & terror financing → greater anonymity and difficulty in tracing funds.
- Cross-border transactions → faster and more opaque movement of illicit money.
- AML/CFT challenges → crypto, fintech and encrypted platforms complicate financial surveillance.
Way Forward
- Strengthen AML/CFT monitoring → cover fintech, crypto and digital payment channels.
- Enhance cross-border cooperation and intelligence sharing → improve detection and tracing of illicit funds.