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FATF Report Exposes Hawala, Shell Firms and Fake Trade
A global group called the FATF studied how criminals hide illegal money.
It found that some criminals use hawala, shell companies and fake trade documents to move money between countries.
Indian investigators helped show how these methods worked in two cases.
In one case, companies pretended that ordinary imports and payments were worth less than they really were.
In another case, an online gambling site used many people and accounts to collect money and pay winners.
Some of the money was changed into cash and sent abroad through hawala.
It later came back to India disguised as foreign investment from the UAE.
The FATF says hawala can also help migrant workers send money legally.
It wants governments and banks to stop criminal networks while protecting legitimate remittances.
A Financial Action Task Force report details how criminal networks move illicit money across borders.
More than 80% of reporting countries identified hawala and similar systems as major laundering methods.
An Indian case involved shell companies, forged documents, underpriced imports and circular trade.
Another case involved online gambling payments routed through panel operators, mule accounts and digital wallets.
The FATF says informal channels can support remittances but urges licensing, registration and stronger safeguards.
- Who
- The Financial Action Task Force, Indian investigators and criminal networks using informal financial channels.
- What
- A FATF report described hawala, shell companies, fake trade paperwork, online gambling and digital accounts used to launder money.
- Where
- The schemes involved India, cross-border transactions, a third country and money returning from the UAE.
- When
- The report was published on Thursday; one Indian investigation took place in March 2022.
- Why
- Criminal networks used these methods to conceal the origin, value, movement and destination of illicit funds.
Law-Enforcement and Regulatory View
Legitimate Remittance View
Role of informal money channels
Law-Enforcement and Regulatory View
The FATF says commercially run underground networks are a serious risk multiplier because they help criminals conceal illicit activity and move proceeds across borders.
Legitimate Remittance View
The FATF acknowledges that hawala and similar systems can meet genuine remittance needs, especially for migrant workers.
Government response
Law-Enforcement and Regulatory View
Governments and banks should use stronger controls, and providers should be licensed or registered to disrupt money-laundering networks.
Legitimate Remittance View
Controls should distinguish legitimate remittances from criminal activity rather than treating every informal transfer as illicit.
Key facts
- Reporting body
- Financial Action Task Force (FATF)
- Countries reporting hawala use
- More than 80% of countries that reported to the FATF listed hawala or similar systems among major money-laundering methods.
- Indian trade scheme
- Shell firms used nominees, forged or stolen identities, underpriced imports and fake import documents to move money abroad.
- Circular trade
- Goods were routed through related companies in a third country, with payments delayed through claimed commercial disputes.
- Online gambling scheme
- Panel operators used UPI, internet banking, digital wallets, mule accounts and stolen identities to handle deposits and winnings.
- Digital hawala
- Networks increasingly coordinate through WhatsApp, Telegram and similar applications, with some settling balances using virtual assets such as stablecoins.
- FATF position
- Hawala and similar providers should be licensed or registered, although such systems can serve legitimate remittance needs.
Sources
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