Treasury Says Chinese Money Launderers ‘Vital’ to Cartel Fentanyl Trafficking

Aug 29, 2025 - 10:02

Updated: 8 months ago

Treasury Says Chinese Money Launderers ‘Vital’ to Cartel Fentanyl Trafficking

The U.S. Treasury Department revealed in an Aug. 28 advisory the scope of Chinese money laundering networks’ pivotal role in the fentanyl crisis and the harm they have caused the United States.

Banks are required by law to report suspicious activity indicative of money laundering. Reports between January 2020 and December 2024 show approximately $312 billion linked to suspected Chinese money laundering activity, according to the Treasury’s Financial Crimes Enforcement Network (FinCEN).

These networks, run by Chinese nationals, are preferred by major cartels, including the Mexico-based Jalisco and Sinaloa cartels, due to their speed, effectiveness, and willingness to absorb financial losses or assume risks on behalf of the cartels, according to the FinCEN report.

The cartels, many of which have been designated terrorist organizations, control “nearly all illegal traffic across the southwest border,” to which the launderers contribute in a “vital” way, according to the report.

“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,” John Hurley, the Treasury’s undersecretary for terrorism and financial intelligence, said in a statement.

Communist China is already considered a key contributor to the fentanyl crisis because the majority of chemicals used to assemble illicit fentanyl are known to originate from Chinese chemical companies.

According to FinCEN, the primary goal of these networks is to acquire large quantities of U.S. dollars and other currencies. FinCEN released a trend report on Chinese money laundering networks earlier this month that outlines ties to other crimes unrelated to fentanyl trafficking, such as health care fraud and illicit gambling activity.

Both Mexico and China have laws that restrict citizens from depositing large amounts of U.S. currency; thus, cartels and Chinese citizens seeking to circumvent the Chinese regime’s currency reporting requirements have turned to laundering networks, according to the report.

“Chinese money laundering networks are global and pervasive, and they must be dismantled,” said FinCEN Director Andrea Gacki.

Where Do the Dollars Go?

According to the advisory, the networks will buy the illicit dollars from a cartel, paying in virtual currency or a rough equivalent in pesos that the cartels can safely deposit in Mexican financial institutions.

The networks then sell the dollars they purchased from cartels to Chinese citizens or businesses that may be trying to avoid Beijing’s foreign currency restrictions, generally at a higher exchange rate, and sometimes through Hong Kong. The buyers transfer Chinese currency, or yuan, from and to China-based accounts to pay for the cost of the dollars.

In the interim, the dollars may be stored in accounts in U.S. banks, and the Treasury Department is warning banks to watch for reportable red flags.

International Students Becoming ‘Money Mules’

The advisory also sheds more light on the Trump administration’s investigation into Chinese international students announced earlier this year. On the heels of that investigation, several Chinese researchers working in the United States were charged with smuggling dangerous biomaterials into the country.

The FinCEN advisory states that Chinese students at U.S. universities are increasingly recruited into these laundering networks, and some students continue to participate after graduating. As student visa holders, they are restricted from seeking many kinds of lawful employment.

Financial institutions were advised to look out for red flags, such as Chinese nationals opening an account under a student, retiree, housewife, or other low-income occupation, yet having unexplained wealth. They may regularly make deposits labeled as “tuition” or “living expenses,” none of which appear to be related to routine payroll, and transfer this money to unknown individuals or escrow and shell companies, often for real estate purchases, according to the advisory.

Sometimes, the laundering is trade-based, in which the account holder appears to purchase U.S. electronics and luxury goods. In one case, Sinaloa cartel members allegedly struck a deal with a Chinese money laundering network to move $50 million in illicit drug proceeds, according to a 2024 Justice Department indictment. Cash was given to the network, which allegedly purchased property, luxury goods, and cars to be shipped to China. Alleged conspirators have been charged but not convicted.

In the case of businesses, red flags include business accounts receiving regular deposits from online marketplaces but with rare or no transactions indicating the purchase of inventory; regular transfers from Mexico, China, Hong Kong, and the United Arab Emirates; and a mismatch between the business type and income.