MONTREAL -- Kamal Ahmed, a licensed agent who wires cash to far-flung parts of the globe from a Montreal laundromat, worries he's losing customers to a rival operating out of another laundromat who offers cheaper fund transfers though an ancient underground money network, known as hawala.

"They say, 'hawala people give me a better rate,"' he explains.

Sandwiched between a Bengali garment shop and a South Asian grocery in the multicultural Parc-Extension neighbourhood, Ahmed's office helps about 15 people a day transfer $15,000 on average -- mainly to Bangladesh but also India, Pakistan and Senegal.

Ahmed's business is steady, but he frets he could be losing ground to shadow banking competitors, who operate outside normal banking regulations.

Behind a desk in a backroom above another Montreal laundromat, one of those rivals works the phone between customer sit-downs.

"We help people get money back to their home, back to Somalia," the young man says, a security camera peering down the hall outside the door. "They want to help their family. We help them."

The employee, who requested The Canadian Press not use his name because he is concerned about legal implications and job security, works part-time as a hawala broker.

From Montreal to Mogadishu, hawala brokers co-ordinate secret cash flows across thousands of kilometres -- without any money breaching international borders.

With roots that stretch back to Asia's ancient Silk Road, hawala allows cheap, quick payments to residents of underbanked countries, where sums sent abroad -- known as remittances -- can be a lifeline. The informal money network operates without wire transfers or bank accounts and is entirely unregulated and untaxed, making it ripe for abuse by criminals and terrorists looking to eschew the financial system's anti-money laundering safeguards.

Here's how it works.

A labourer in Dubai who wants to send funds to his family in Bangladesh hands 800 dirhams, Dubai's local currency, to a nearby broker, and receives a code in exchange. The labourer then calls his parents back home and tells them the code, who present it to their local broker and receive the cash in exchange, minus a commission fee.

No money physically crosses borders. Transactions move in both directions at agreed-upon exchange rates, and dealers periodically settle any imbalances that stem from lopsided funding flows with cash or trade-based exchanges.

The International Monetary Fund has pegged unrecorded remittances -- which include hawala -- at 50 per cent more than recorded international cash flow. That would mean US$1.03 trillion changed hands underground last year, based on World Bank figures.

Hawala's model has attracted attention from fintechs looking to disrupt the traditional banking system. They have recognized the profits to be made in peer-to-peer transfers and started to serve up cut-rate payments, heedless of lines on a map.

TransferWise, founded in the U.K. in 2011 and now operating in more than 40 currencies, including Canadian, sidesteps international fees through its own system of connected local bank accounts.

Paga and M-Pesa are upending Africa's financial system with instantaneous cash transfers via borderless accounts. With Paga, as with hawala, a broker relays a code to the sender -- but by text -- passing it on to a recipient who presents it to receive the cash, either in the form of bills or a beefed-up balance.

One component that startups have difficulty emulating, however, is its heavy reliance on trust, shaped as much by clan and cultural boundaries as by geographic ones.

"It's not mixed ethnically," said Brigitte Unger, professor of economics at Utrecht University and head of the world's biggest tax evasion project, run by the European Union.

Hawala -- especially prominent in the Persian Gulf states, India and Pakistan -- came under the gaze of U.S. authorities after the Sept. 11 attacks by al-Qaida, which relied on hawala networks to fund the operation, authorities say.

"If you transfer money without a trace, it's also very attractive for criminal money and also for terrorist money," Unger said.

Growing regulation and digitization in international banking will not root out those networks, but push money-launderers deeper underground and bolster a hawala system authorities have barely scratched the surface on, she said.

"Water always finds its way to get through other channels."

Despite the pervasiveness of hawala and other informal banking operations, Canada's anti-money-laundering watchdog disclosed only five cases of non-compliance to police in connection with money services operations in 2017-18. The figure marks an uptick, nearly matching the six incidents it reported in the four preceding years.

The Financial Transactions and Reports Analysis Centre of Canada said federal legislation prevents it from revealing whether any hawala-style operations were among the cases.

Incidents have surfaced nonetheless. In 2017, the RCMP laid 16 criminal charges against a man accused of laundering $100 million in 12 months. Mounties believe the suspect was part of a vast group of underground bankers in Toronto and Montreal with ties to real-estate money laundering -- a problem also highlighted in recent reports out of B.C.

Police say the figures don't do justice to the magnitude of illicit money transfers.

"In Canada, underground banking is alive and well in a big way," said Garry Clement, former head of the RCMP's Proceeds of Crime program.

Hawala plays a critical role for impoverished families without easy access to banks and effectively locked out of transfer firms with higher fees.

Brokers operate out of apartments, travel agencies, grocery stores, currency exchanges and import-export companies, mixing illicit and legitimate business.

"A lot of times it's family-organized," Clement said.

"But they have been around for eons and eons, and they've done it effectively."