Chinese Money Laundering Ties with Cartels Exposed

Mexico City — Chinese money laundering networks "represent a significant threat to the United States financial system," according to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury. The agency stated these networks have not only formed a "mutualistic relationship" with Mexican drug cartels that need to launder profits from other criminal activities but also serve as the scaffolding for real estate investments in the United States.

Following a review of 137,153 suspicious activity reports received between 2020 and 2024, which amounted to $312 billion, FinCEN has urged U.S. financial institutions to be alert to detect the use of Chinese money laundering networks by Mexican drug cartels. The agency also suggested that the U.S. real estate sector is flooded with money from these money laundering transactions.

"Chinese money laundering networks are considered professional money launderers and play a vital role in laundering the narcotrafficking profits of cartels in the United States. This is due, in part, to the speed and efficiency of their money laundering operations, as well as their willingness to absorb financial losses and assume risks for the cartels and other clients," according to a FinCEN report.

The U.S. agency added that "the increased prominence of Chinese money laundering networks, including their business relationships with cartels and other transnational organizations, has been driven, in part, by laws passed by the governments of Mexico and the People's Republic of China that restrict financial flows."

On one hand, Mexico's exchange restrictions—instituted in 2010 and revised in 2014—prevent large U.S. dollar deposits in Mexican financial institutions, hindering the cartels' ability to launder funds through the formal financial system. As a counterpart, China's exchange control laws limit the amount of money its citizens can transfer abroad each year and can change into other currencies.

Hence, Chinese money laundering networks serve as a hinge. On one hand, they meet the demand for large amounts of U.S. dollars from Chinese citizens seeking to have money abroad and, on the other, the need for cartels to launder their illicit profits in the U.S. market.

This has given rise to "a mutualistic relationship in which cartels sell their illicitly obtained U.S. dollars to Chinese money laundering networks, who, in turn, sell the dollars to citizens trying to evade China's currency control laws," stated the Treasury through FinCEN, an agency similar to Mexico's Financial Intelligence Unit.

It explained that mirror operations are often used. For example, once U.S.-based money laundering networks receive dollars from a cartel, they coordinate with their counterparts in China so that the latter transfer an equivalent amount in pesos to the cartels' accounts in Mexico, minus a commission. In other words, the Chinese organizations buy the Mexican drug cartels' dollar-denominated profits with pesos.

FinCEN provided an example of a case linked to the Sinaloa Cartel, in which a dozen people were accused of conspiring to launder more than $50 million in drug trafficking profits through China's underground banking system.

Money Laundering in Real Estate

FinCEN also acknowledged that these money laundering schemes could be facilitating the purchase of real estate in the United States. In fact, China has been the top origin country for most foreign buyers of U.S. real estate for years, with Mexico ranked third.

From its review of the reports sent by banks between 2020 and 2024, FinCEN found 17,389 reports associated with more than $53.7 billion in suspicious activities related to the real estate sector, representing nearly one-sixth of the money under review.

"Chinese money laundering networks may use money mules or shell companies to purchase real estate, which could serve as an investment for the Chinese money laundering networks or for a wealthy client of the Chinese money laundering networks based in China," according to FinCEN.

It pointed out that many of the accounts used to move money are registered in the U.S. financial system with a passport from the People's Republic of China, but are held by individuals whose occupation is listed as "student," "homemaker," "retiree," "worker," or other designations that do not normally involve large volumes of transactions.

Besides drug cartels and the real estate sector, FinCEN noted that these money laundering networks are also involved in human trafficking and fraud related to care tasks and gambling. For instance, their presence was found in 83 nursing homes, all with addresses in New York.

"Chinese money laundering networks are global and omnipresent and must be dismantled (…) they launder profits for drug cartels based in Mexico and are involved in other major clandestine money movement networks within the United States and around the world," accused FinCEN Director Andrea Gacki.