More than 400 illegal money transfer agencies were shut down by police on Monday as part of a nationwide anti-crime and terrorism investigation.
Prosecutors said 401 agencies across the country were raided after finance police uncovered 280,000 irregular cash transactions worth some 88 million euros.
They said around 30% of Italy's 25,000 cash transfer firms were illegal or carried out irregular operations.
National anti-Mafia Prosecutor Pietro Grasso said at a press conference that the outlets constituted a "parallel banking system" used by organised crime groups for money laundering and tax evasion purposes.
Grasso said the instant, informal money transfer system was also used, although to a lesser extent, by terrorists and groups which finance terrorism.
He said three foreign suspects whose names were on an international terrorism blacklist had used the services of illegal cash transfer agents.
Two of the suspects are currently resident in the northeast port of Ancona while the third has left the country, Grasso said.
The agencies raided on Monday were all linked to three mother companies based in Rome, Milan and Verona.
Searches were carried out on outlets situated in all of Italy's 20 regions except for the island of Sardinia and the central region of Molise.
Money transfer agencies, which allow money to be sent around the world in a matter of minutes and require no bank accounts or credit cards, have taken off in Italy in the past few years, the system being particularly popular with immigrant workers who need to send money home.
Italy now has the second biggest cash transfer market in the world after the United States, with some 1.4 billion euros in transactions every year.
The biggest volume of transactions in 2006 involved China, with 37 million euros transferred there last year, followed by Romania (23.2 million) and Morocco (21.4 million).
Prosecutors in Ancona, who began investigating the system three years ago, said that most of the agencies raided on Monday required no identification from their customers and did not keep records of their transactions.
Cash transfer agents are required by law to request and register the identification of customers.
Junior Economy Minister Vincenzo Visco sounded the alarm a month ago, saying more controls were needed on this financial system.
"There is a huge money laundering activity in Italy linked to drug trafficking, organised prostitution, illegal betting activities, corruption and extortion. A growing part of this activity appears to be connected to the development of the money transfer system," he said.
"Tens of thousands of operators work in this system which is subject to no inspections or monitoring," he said.
Visco stressed that the size of the money transfer business in Italy could not depend on immigrant custom alone.
