4 November 2026: FATF release report on Underground banking and Hawala
The Financial Action Task Force (FATF) has released a report on Hawala and underground banking. The report highlights key sectors susceptible to exploitation by criminal groups through the use of underground banking and Hawala methods. The report is based on data collated through surveys of 46 jurisdictions as part of a FATF project team with over 30 collaborators.
Report Findings
The use of underground banking and Hawala/other similar service providers (HOSSPs) is not inherently criminal and may be used to move both legitimate and illicit funds. However, the money laundering (ML) and terrorist financing (TF) risks associated with underground banking and HOSSPs have long been understood, including in relation to professional money laundering services (PML).
The report highlights that underground banking- and HOSSP-related PML is no longer exclusively associated with traditional cash-intensive crimes such as drug trafficking or smuggling but increasingly serves as an ML infrastructure for a broader spectrum of criminal economies, including:
- Cyber-enabled crime;
- Corruption;
- Tax evasion;
- TF;
- Undeclared work;
- Illegal gaming and gambling; and
- Transnational organised crime generating proceeds from diverse activities.
A key point defined in the report is that PMLs utilise a hybrid model of various typologies combined. Some key examples highlighted that relate to the gambling sector include:
- Casino and junket-related value transfer, used to insert cash into the formal financial system or move value through gambling-related arrangements;
- Money mule networks, including students or temporary residents abroad, used to fragment deposits and reduce suspicion;
- VA-enabled settlement, often combined with trade settlement, cash pooling or cash payout arrangements; and
- Misuse of regulated payment infrastructure, including PSPs and vIBANs (see Box 7 of report).
As noted in various gambling typology and flag guidance released by the GSC, the UNODC has documented a digitised and casino-linked manifestation of underground banking (distinct from HOSSP-based models), in which casinos, junkets, online gambling platforms, and VA exchanges form part of underground banking and ML infrastructure.
Isle Of Man as an IFC
The report highlights the increasing professionalism and scale of these schemes, which exhibit more structured and service-oriented ML infrastructures, specialised roles, standardised processes, and the growing use of professional intermediaries and enablers including deep integration with the formal financial sector. As noted in the Isle of Man National Risk Assessment (NRA), the IOM has an increased risk of being used to launder the foreign proceeds of crime due to its nature as an international financial centre (IFC).
Due to its international nature, the online gambling sector on the Isle of Man was given an ML risk rating of Medium-High in the NRA. However, the isle of man gambling sector is subject to robust regulation and oversight from the Gambling Supervision Commission (GSC), with a strong legal and supervisory framework in place which work to mitigate those risks. It is important that we continue to strike a balance, mitigating threats through a risk-based approach to AML/CFT/CPF supervision.
Key takeaways
- Due to the global and hybrid, cross-industry nature of the threat, the report highlights the importance of a holistic and joined-up approach in tackling PML;
- Regulators AND private sector should ensure suspicious activity reports (SARs) are undertaken where appropriate;
- Joined-up approach: Public Private Partnerships (PPP) are essential to understanding and mitigating risks. Groups such as the Isle of Man Financial Crime Partnership (IOM FCP) protect the Island through sharing expertise, technical resources and the production of strategic documents to increase the detection and reporting of suspected financial crime;
- Conduct EDD on B2B partners when flags appear, for example where invoices/payments/behaviours conflict with operator understanding of their profiles/contract, invoices settled in VA where origin/destination is unknown. The FIU September typology covers an example where B2B partner/supplier invoice amounts conflict with the CRA and relationship history;
- Undertake EDD on customers where there is suspicion of potential Money mule networks or collusion (such as use of enablers/mules and through AI/synthetic identities). Conduct OSINT enhanced screening where commensurate to risks.
The report reinforces that gambling-related financial crime risks should be considered within the wider payment and value-transfer ecosystem. PML networks can connect gambling platforms, third parties, mule accounts, payment providers, virtual assets and underground banking arrangements across jurisdictions.
In summary, operators should assess gambling-related financial crime risks across connected accounts, business relationships and payment channels, rather than in isolation. Understand who funds and receives payments, investigate unexplained activity, apply risk-based enhanced checks and escalate concerns. Document decisions, recognising that risk indicators alone do not establish ML or TF.