FinCEN Targets Chinese Money Laundering Networks in Fight Against Illicit Finance
In a decisive move to safeguard the United States’ financial system and the health of its citizens, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued both a formal advisory and a Financial Trend Analysis (FTA) last week spotlighting the growing threats posed by Chinese Money Laundering Networks (CMLNs) to the integrity of our domestic and global ecosystems. Over recent years, the federal government has discovered a growing, sophisticated network of criminal activity linking Chinese criminal organizations and Mexico-based drug cartels, with this relationship ultimately facilitating the laundering of illicit proceeds from drug trafficking, human trafficking, fraud, and other criminal activities. The returns from this new alliance have been staggering, with analysts estimating that the proceeds of the illicit activity taking place between these two parties has topped $310 billion in the period between January 2020 and December 2024 alone.
A key driver of CMLN activity is the symbiotic relationship between Mexico-based cartels and Chinese operatives seeking to bypass stringent currency controls. The relationship is mutually beneficial in that Mexico’s restrictions on depositing large sums of U.S. dollars into its financial system push cartels to rely on CMLNs to launder drug proceeds. Meanwhile, China’s annual limits on outbound money transfers create demand among Chinese citizens for U.S. dollars, which CMLNs supply by purchasing illicit funds from cartels. Mexican cartels – particularly the Sinaloa Cartel and Cartel Jalisco Nueva Generación (CJNG) – remain amongst the most powerful and far-reaching illicit narcotic organizations in the world, and given Mexico’s proximity to the United States, the ability of these organizations to produce substantial amounts of illegal fentanyl and its analogs has contributed directly to the opioid epidemic seen in America today. The production line however appears to be receiving a direct boost from this budding partnership with their Chinese counterparts. Utilizing precursor materials created by and smuggled in from China other countries and later distributing the drugs in the form of pills often disguised as prescription opioid medications such as Xanax, Oxycodone or Percocet, Mexican agents have been able to infiltrate the United States defenses to further fuel the fire, while boosting their bottom-line and allowing their destabilizing activity to continue. In return for their services and providing these precursor materials for synthesis, Chinese entities too receive significant amounts of money that have been previously laundered by Mexican shell companies, or they receive the dirty cash itself which they ultimately clean through the international financial system.
To avoid detection throughout this process, the vehicles of choice for exchanging funds by Mexican and Chinese criminal networks have also evolved to include a number of varying outlets, most notably cryptocurrencies, casinos, bulk cash, and even value transfers utilizing wildlife products such as protected and unprotected marine products and timber. These transactions also often occur through social media advertisements or personal networks, with CMLNs employing other methods such as trade-based money laundering, money mules, and mirror transactions to obscure the money trail. Beyond drug trafficking, CMLNs have also been implicated in a range of other illicit activities. FinCEN’s advisory identified 1,675 BSA reports potentially tied to human trafficking or smuggling and 43 reports involving $766 million in suspicious transactions linked to adult and senior day care centers in the United States.1 Additionally, 17,389 BSA reports flagged $53.7 billion in suspicious real estate transactions, suggesting CMLNs use shell companies and money mules to funnel illicit funds into high-value U.S. real estate markets, often on behalf of wealthy Chinese clients.1 This diversification has created even more issues for international authorities attempting to stop these nefarious activities. While the Trump Administration has gone on the offensive to combat drug smuggling and cartel violence – officially designating several Mexican cartels as Foreign Terrorist Organizations (FTOs), expanding international sanctions, and recently calling for military force to be used against a slew of drug cartels in Mexico and elsewhere in Latin America – their ability to deter the activity of the Chinese actors involved in these schemes has been futile to date.
FinCEN’s latest actions aim to alert financial institutions to the pervasive, developing role that CMLNs have grown to play in enabling transnational crime, including the very cartels designated as FTOs. “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,” said Under Secretary for Terrorism and Financial Intelligence John K. Hurley.1 The Advisory provides critical red flag indicators aimed to help banks and other institutions detect suspicious activities, while the FTA offers a detailed analysis of CMLN operations based on the analyzed Bank Secrecy Act (BSA) reports.
FinCEN’s reports also highlight alarming new tactics, such as CMLNs recruiting complicit insiders within financial institutions or using counterfeit Chinese passports to open accounts within America institutions. According to their report, money mules, often posing as students, housewives, or retirees, conduct large transactions inconsistent with their reported occupations, raising red flags for suspicious activity that in many cases slips through the cracks of a bank’s AML defenses.1 By issuing these reports, FinCEN is equipping financial institutions with the tools to identify and report CMLN activities, reinforcing ongoing efforts by the Treasury and law enforcement to disrupt these networks. This latest initiative underscores the U.S. government’s commitment to combating the financial infrastructure of transnational crime, maintaining national security, and ensuring the integrity of the global financial system.
FinCEN’s Advisory and FTA can be found here.
Citations
- “Fincen Issues Advisory and Financial Trend Analysis on Chinese Money Laundering Networks.” S. Department of the Treasury, 28 Aug. 2025.