What the Fedpol Roundtable on Underground Banking Is All About
Most people associate the term underground with the London Tube, subcultures, or an iconic «velvety» rock band - but not with banks. Yet the term underground banking appears in an official communication from the Swiss federal authorities.
The Money Laundering Reporting Office Switzerland (MROS), part of the Federal Office of Police (Fedpol), organized the second international roundtable on underground banking last week in Bern. Experts from around the world exchanged insights on news trends, investigative success, and strategies to combat illegal financial flows.
Oder than Banks themselves
Fedpol conveniently offers a definition: «Underground banking refers to informal, unregulated payment systems through which funds are transferred outside the official banking sector. An intermediary in one country receives the funds and ensures the equivalent amount is paid out in another country - without formal transactions or bank accounts.» In some cases, the funds eventually find their way back into the traditional financial system.
The agency also provides a historical perspective: «Some form of underground banking has existed for over 1,000 years — longer than formal banking.» This is accompanied by a stark warning: originally developed to transfer money safely, quickly and over long distances, such systems are now increasingly being used for money laundering, terrorist financing, and sanctions circumvention. Whether cryptocurrencies should be considered a modern form of underground banking remains unanswered.
A Gathering of the Global Anti-Money Laundering Elite
Representatives from Interpol, Europol, the United Nations Office on Drugs and Crime (UNODC), the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), as well as national and international law enforcement agencies and Financial Intelligence Units, were present in Bern.
Discussions focused on the latest insights into global money-laundering and terrorist-financing networks, the misuse of payment service providers, and digital analytical tools for uncovering hidden financial flows. A particular emphasis was placed on the cross-border interlinking of money-laundering structures with other criminal organizations.
Underground versus Shadow
The third roundtable on underground banking may not be far off. Fedpol’s unsurprising conclusion: «Only through international cooperation, real-time information exchange, and technological innovation can increasingly sophisticated shadow financial systems be effectively combated.»
Shadow banking, unlike underground banking, has long been a fixture in policy vocabulary - even if official bodies no longer use the term. The Swiss National Bank, for instance, prefers the bloodless label «non-bank financial intermediaries» (NBFI) in its Financial Stability Report. With any luck, underground banking won't meet the same technocratic fate.
