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Underground banking : legitimate remittance network or money laundering system?

Abstract

Underground banking, where money is transferred through informal rather than formal banking sectors, is a recognised method by which legitimate remittances from overseas workers are routinely transferred. However, underground banking has also long been regarded as a conduit for money laundering by criminal organisations and arguably by terrorist networks. It is important to achieve a balance between regulating the underground banking sector in an attempt to reduce the flow of illicit funds, and permitting its continued use as a legitimate, alternative remittance system. This paper provides policy makers and others with an interest in underground banking matters with a concise overview of how underground banking systems work, along with the potential associated with such systems for criminal activity and the various regulatory responses that governments have employed to date.

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