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Dutch authorities have known for decades that drug trafficking organizations and other crime syndicates launder their proceeds across borders through ledger-based, hawala-styled informal value-transfer systems. But when they and their counterparts in France, Belgium and the U.K. infiltrated encrypted communications networks used by thousands of Europe's top criminals around five years ago, they realized they had vastly underestimated the scale and complexity of the financial black market, also known as "underground banking." They not only learned that underground banking networks handle far more money than previously known, but they also grasped the extent to which they operate outside the formal...