Investigating Professional Money Laundering, Underground Banking, and the Use of HOSSPs

A new report from the Financial Action Task Force (FATF) highlights the growing role of underground banking, hawala and other similar service providers (HOSSPs) in facilitating illicit finance. The report highlights 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% 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.