Explainer: How Secret Chinese Networks Move Billions Through US Banks

For years, the Chinese communist regime has been accused of fueling the fentanyl epidemic in the United States, a claim that gained renewed attention when President Donald Trump imposed tariffs on goods from China as well as Mexico and Canada, citing their role in the drug crisis.

Most fentanyl entering the United States is produced in Mexico using chemical precursors imported from China. According to a February White House press release, the Chinese Communist Party (CCP) actively supports these operations through tax rebates and grants, and holds stakes in companies involved in trafficking fentanyl and its precursors.

In recent years, there has been a growing amount of fentanyl being smuggled into the United States via its northern border with Canada as well.

While many Americans know that fentanyl is smuggled into the country, few understand how the trade is financed or how illicit profits move through the U.S. financial system. A recent Treasury Department report found that Chinese money launderers moved over $300 billion through U.S. banks in the past five years, helping Mexican cartels hide their profits.

Here’s a closer look at how these funds move undetected despite strict U.S. banking regulations and reporting requirements.

How China Launders the Money

The growing ties between Chinese money launderers and Mexican cartels and other criminal groups are partly the result of laws in Mexico and China that restrict money flows, according to a report issued by the Treasury’s Financial Crimes Enforcement Network (FinCEN).

In Mexico, current laws prevent large amounts of U.S. dollars from being deposited into Mexican banks. This hinders drug cartels’ ability to move their U.S. dollars through Mexico’s financial system, so they turn to professional money launderers operating in the United States.

In China, strict currency controls limit how much foreign currency Chinese citizens can purchase annually and prohibit direct transfers of yuan overseas without prior approval. This creates strong demand for U.S. dollars outside official channels.

As a result, Chinese citizens’ thirst for U.S. dollars and the cartels’ race to launder their cash have created this criminal alliance.

Cartels sell their dollars to Chinese money laundering networks, which then sell those dollars to Chinese citizens looking to bypass China’s currency restrictions.

The Chinese money laundering networks are preferred by major cartels, including the Mexico-based Jalisco New Generation and Sinaloa cartels, because of their speed, effectiveness, and willingness to absorb financial losses or assume risks on behalf of the cartels, according to the FinCEN report.

Chinese Students Increasingly Used as Money Mules

Chinese money laundering networks are made up of Chinese nationals based in the United States and abroad. They often recruit members of Chinese or other diaspora communities to act as cash couriers, money mules, or brokers. In recent years, they’ve increasingly drawn U.S.-based Chinese students into their operations.

Since foreign students often struggle to find legal employment, they are more vulnerable to being recruited. Some may not even realize their activities are illegal, believing they are simply helping fellow Chinese citizens access U.S. dollars while making some extra income, according to the FinCEN report.

Some of these students continue to participate in money laundering operations even after graduating.

Sinaloa Cartel: A Money Laundering Case Study

Chinese money laundering networks use a variety of schemes designed to disguise funds derived from illegal activity.

One common method is called “mirror transactions,” where cartels hand over U.S. dollars in the United States, and money laundering partners in Mexico immediately transfer the equivalent value in pesos to cartel accounts, keeping a small fee. Sometimes cryptocurrency is used in place of cash.

They also use money mules, such as students, to open bank accounts and deposit illicit funds. These individuals disguise their activity by listing ordinary occupations like “student” and routinely deposit cash or receive wire transfers labeled as “tuition” or “living expenses.”

Another method is trade-based laundering, where they use money mules to purchase electronics and other luxury goods in the United States and sell them through online platforms or export them to counterparties in other countries to launder the cartels’ illicit funds.

In June 2024, the U.S. Department of Justice charged Los Angeles-based associates of the Sinaloa cartel with conspiring with money-laundering groups linked to China to launder over $50 million in drug proceeds.

Between October 2019 and October 2023, cartel members imported large amounts of narcotics, including fentanyl, cocaine, and methamphetamine, into the United States, generating huge cash proceeds in U.S. dollars.

The suspects allegedly used multiple methods to launder these funds, including trade-based laundering, buying luxury goods or cars, purchasing cryptocurrency, and depositing smaller amounts into numerous accounts to avoid banks from reporting large cash deposits to the U.S. government, according to the report.

Chinese Money Laundering Networks Linked to CCP

U.S. government documents indicate that Chinese money-laundering networks have close ties to Beijing, advancing its political and economic objectives.

A 2024 report by the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party stated that the CCP fuels the U.S. fentanyl crisis through grants and subsidies, shields fentanyl traffickers, and profits directly from the trade. The report also cites evidence that “CCP-tied Chinese organized criminal groups [have] become the world’s premier money launderers.”

John Cassara, an expert in anti-money laundering and terrorist financing, told Congress in 2023 that the CCP is the “largest money laundering actor in the world.”

His 2023 book, “China – Specified Unlawful Activities: CCP Inc., Transnational Crime and Money Laundering,” exposes the communist regime’s money-laundering methods.

During his testimony, Cassara noted that both the international community and the U.S. government have been silent on the scale of China’s involvement in transnational crime and money laundering.

“We shouldn’t be silent,” he said.

Emel Akan is a senior White House correspondent for The Epoch Times, where she covers the policies of the Trump administration. Previously, she reported on the Biden administration and the first term of President Trump. Before her journalism career, she worked in investment banking at JPMorgan. She holds an MBA from Georgetown University.

Reprinted with permission from The Epoch Times by Emel Akan.

The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.