Hawala and other underground financial networks in Pakistan are becoming increasingly sophisticated, using virtual assets, fintech platforms, and digital payment systems to move and conceal illicit funds, according to a new joint report by the Financial Action Task Force (FATF) and the Organisation for Economic Cooperation and Development (OECD).
The report draws on input from more than 45 jurisdictions, including Pakistan and India, and finds that underground banking networks have evolved into organized, commercially operated businesses. More than 80 percent of reporting jurisdictions identified hawala and similar service providers as major channels for professional money laundering.
A Case Study: Oman-Pakistan Hawala Network
The report highlighted a specific case involving a hawala network operating between Oman and Pakistan. Omani authorities identified a WhatsApp group used by suspected hawaladars to advertise foreign exchange and remittance services to expatriates. Customers paid through cash or mobile-linked transfers, while operators used digital wallets to settle payments with counterparts in Pakistan.
The network offered cheaper rates with little or no fees, using digital payment channels including Raast to transfer funds into Pakistan. Authorities identified six suspected individuals linked to the network, with transactions worth about $72,293 recorded over a single year.
The Rise of Digital Hawala and AI Tools
The FATF and OECD said the shift toward “digital hawala” is becoming widespread, with nearly 70 percent of respondents reporting the use of new technologies by underground financial networks. These include encrypted messaging platforms, bank accounts, mobile wallets, fintech applications, instant payment systems, and virtual assets such as stablecoins. The report also identified the emergence of AI-based tools and purpose-built hawala applications, warning that these technologies can make money laundering operations faster, harder to detect, and easier to expand across borders.
Beyond hawala, the report noted that professional money laundering networks are increasingly using the formal financial system as well, including bank accounts, payment service providers, virtual IBANs, prepaid cards, and virtual asset wallets. Lawyers, accountants, auditors, corporate service providers, financial consultants, real estate agents, and casinos were also identified as potential facilitators. The FATF and OECD called for stronger detection and enforcement, better coordination between governments and the private sector, and greater international cooperation, while stressing the need for clear regulations that maintain access to legitimate financial services.
