Chinese Labs and Mexican Cartels: Fueling the Opioid Crisis?

Fentanyl appears to have become the drug of choice in the ongoing
the global opioid crisis and its effects have been devastating on the youth of the
world, but more specifically the United States has given recent developments.
Mexican drug cartels have found ways to sneak these lethal drugs through
the southern border of the U.S. and have targeted American citizens with
more cash freely available to spend than many of their international
counterparts – especially with the surge in COVID relief funds issued to
qualifying citizens over the past year. Yet the true wonder is how criminal
organizations have managed to move mass quantities of these narcotics
despite increasing restrictions on travel due to the pandemic. Recent
reports indicate that they may have had help from fentanyl-makers and
money launderers on the eastern hemisphere.
What is fentanyl?
Pharmaceutical fentanyl is a synthetic opioid, approved for treating severe
pain and for hospice care for individuals with serious medical conditions
(i.e. advanced cancer-related symptoms). It is estimated to be 50 to 100
times more potent than the more widely used opiate morphine. It is often
prescribed in the form of transdermal patches or lozenges that have
historically been diverted for illicit sales and abuse. Most cases of fentanyl-
related harm, including overdose and death, are from illegally made
fentanyl versus their medical derivative, however. These concoctions are
sold by drug dealers and are believed to have a heroin-esque effect on their
users.
China-Mexico Connection
Authorities have been aware of the partnership between the Chinese and
Mexican cartels for several years now. Many of the chemicals manufactured
in China and bought by Mexico’s notorious drug cartels in transactions
facilitated by a global network of Chinese criminal groups are fueling the
fentanyl crisis, which has contributed to the death of tens of thousands of
American citizens alone (the U.S. death toll tied to fentanyl in 2020 is
estimated at a record 90,000).3 In 2019, the Trump Administration and the
U.S. Drug Enforcement Administration (DEA) sought to disrupt operations
of this variety by pressuring China into banning fentanyl, with the country
following suit with a major crackdown that saw an uptick in regulation on the drug, ultimately leading to the class-scheduling of fentanyl which
effectively decreased the amount of the drug allowed to be exported from
the Republic. In response, highly equipped Chinese labs creating the
developed drugs attempted to work around these restrictions, shifting their
operations to creating only the precursor ingredients needed to develop the
final product. This practice is technically viewed as legal since the export of
these raw materials fail to trigger any of the aforementioned established
restrictions in the U.S or China. Since then, these very Chinese labs have
been found to be actively exporting these precursor ingredients to Mexican
criminal organizations who can just as easily prepare them before
smuggling and selling the final product. With no Chinese regulation on
exports of these precursor materials in sight, many believe we may just be
scratching the surface of an issue that is already growing at an exponential
rate.
The Chinese do more than simply create the ingredients for this drug trade
however; they also launder massive amounts of cash in the process. A
a spokesperson for the U.S. State Department recently went on record noting
that Chinese money laundering organizations that exploit the People’s
Republic of China’s (PRC) institutions “dominate money laundering globally,
providing this service to cartels that manufacture fentanyl in Mexico using
PRC-origin chemicals.”3 While the Chinese government placed a formal
restriction on cash transfers in 2017, capping them at $50,000 for annual
foreign currency exchanges, law enforcement reporting indicates there has
been a sharp increase in Chinese money laundering groups and Mexican
[transnational criminal organizations] collaborating to move/launder money,
a 2020 DEA assessment states.2 “In some cases, there appear to be
agreements between Mexico-based TCO leaders and Asian [money
laundering organization] heads based in Mexico.”2 What is quite worrisome
is the fact that cartels synthesizing these drugs appear to be requiring less
sophisticated (and thus more easily obtainable) ingredients to create
synthetic fentanyl. Yet while fentanyl is the name-brand narcotic leading
the opioid crisis at the moment, this intercontinental drug trade also
includes other drugs including methamphetamines and cocaine which are
highly sought after in countries outside the U.S.
Over the past few years, the United States Justice Department has
investigated several Chinese businessmen who laundered millions of dollars
for the Mexican drug cartels. Last year, the Office of Foreign Assets Control
(OFAC) designated four Chinese citizens as “facilitating payments for the
purchase of fentanyl analogs or other controlled substances” for drug traffickers in Mexico and Colombia.”4 Through their initial investigations,
the American government has also discovered an increase in money
laundering through underground Chinese banking systems that has seen
these financial flows reach North American soil. These Chinese criminals
utilize the growing medium of shell companies as fronts to conceal the
origins of their illicit fundraising efforts, allowing them to house illegally
obtained cash without fear of detection. These developments are taking
place in both the United States and Canada as we speak, creating an even
more significant uphill climb for the proper authorities.
Given the growing scope of these practices, these developments are being
viewed as an international crisis and once again, the financial industry has a
chance to make an impact on the frontlines. Not only can financial
institutions prevent money laundering by conducting their proper due
diligence, they can also prevent the youth of North America and the greater
world from being destroyed by these potent drugs. Paying careful attention
to any transactions, accounts, or business ties related to either Mexico or
China is a step in the right direction towards cutting off the financial
streams that help the criminal enterprises behind the illicit drug trade
thrive.
Citations
1. “Fentanyl.” Centers for Disease Control and Prevention, Centers for Disease Control
and Prevention, 16 Feb. 2021. 
2. Giaritelli, Anna. “Chinese Money Launderers Team up with Mexican Cartels to Profit
Billions from US Fentanyl Crisis.” Yahoo! News, Yahoo!, 13 July 2021. 
3. Jamali, Naveed, and Tom O’Connor. “Chinese Chemicals in Mexican Cartel Hands
Feed Deadly U.S. Fentanyl Crisis.” Newsweek, 5 May 2021. 
4. “Treasury Targets Chinese Persons Involved with Drug Trafficking Organization
Moving Fentan