The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a stark warning on the scale of Chinese money laundering networks (CMLNs), describing them as a significant and growing threat to the U.S. financial system.
In a pair of publications released Monday — an Advisory for financial institutions and a Financial Trend Analysis (FTA) — FinCEN outlined how Mexico-based drug cartels, including groups designated as Foreign Terrorist Organizations, are leveraging CMLNs to launder billions in illicit proceeds through the United States.
“Money laundering networks linked to individual passport holders from the People’s Republic of China enable cartels to poison Americans with fentanyl, conduct human trafficking, and wreak havoc among communities across our great nation,” said John K. Hurley, Under Secretary for Terrorism and Financial Intelligence. He pledged that the U.S. would not allow criminal networks to freely move dirty money through American banks.
FinCEN Director Andrea Gacki echoed the concern, calling CMLNs “global and pervasive,” with operations extending beyond drug trafficking to include fraud, human smuggling, healthcare scams, and real estate-based laundering.
$312 Billion in Suspect Transactions
According to the FTA, FinCEN reviewed 137,153 Bank Secrecy Act (BSA) reports filed between January 2020 and December 2024, identifying approximately $312 billion in suspicious activity tied to suspected CMLN operations.
The reports paint a picture of sprawling networks that not only launder cartel drug proceeds but also facilitate illicit money movement schemes across multiple sectors. Among the findings:
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Human trafficking & smuggling: 1,675 reports flagged activity linked to exploitation networks.
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Healthcare fraud & elder abuse: 108 reports highlighted suspicious deposits tied to scams and abuse, including cases linked to adult and senior day care centers in New York, totaling about $766 million.
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Real estate laundering: More than 17,000 reports indicated $53.7 billion in suspicious property purchases, often involving shell companies, money mules, or wealthy Chinese investors.
A Mutually Beneficial Arrangement
The Treasury detailed how cartels and CMLNs have formed a “mutualistic relationship”. Because of Mexico’s restrictions on large U.S. dollar deposits and China’s strict currency controls, cartels offload illicit dollars to CMLNs. In turn, Chinese nationals seeking to circumvent limits on overseas transfers buy those dollars, allowing both sides to benefit.
This system, officials warn, has enabled vast sums of criminal proceeds to enter the U.S. financial system undetected, fueling both cartel operations and illicit Chinese wealth flows abroad.
Methods and Manipulation
CMLNs employ a wide range of tactics, including trade-based money laundering, mirror transactions, and the use of money mules, sometimes equipped with counterfeit Chinese passports. FinCEN also noted that networks may recruit or infiltrate financial institution employees, turning them into insiders who can manipulate accounts and reporting systems.
Red Flags for Banks
To combat these schemes, FinCEN’s Advisory highlights red flags for financial institutions, including:
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Accounts opened by individuals listing occupations inconsistent with large transaction volumes (e.g., “student,” “retired,” or “housewife”).
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Complex, layered real estate purchases involving shell companies or third parties.
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Frequent use of cash-based transactions tied to personal or social media networks.
Mounting Pressure
The warning comes amid intensifying scrutiny of U.S. efforts to counter fentanyl trafficking, money laundering, and foreign criminal infiltration of the financial system. The scale of suspicious activity identified — more than $300 billion — underscores both the sophistication of CMLNs and the challenges facing regulators.
Treasury officials insist the new guidance will strengthen banks’ ability to detect illicit flows, but experts warn that dismantling CMLNs will require coordinated enforcement with international partners and tighter oversight of sectors such as real estate, where illicit money often finds safe haven.
“Chinese money laundering networks are global and pervasive, and they must be dismantled,” said Gacki. “We are working to bankrupt transnational criminal organizations and their enablers — but financial institutions remain the first line of defense.”
For more information, the full advisory can be accessed below.
By FCCT Editorial Team
