Money laundering isn’t new — and neither is China’s role in it. Millennia ago, Chinese merchants developed schemes to “clean” the profits of commercial trade and avoid taxation. Today, their successors are doing much the same. Only now, they’re laundering billions through the U.S. financial system and fueling one of the deadliest fentanyl-fueled drug crises in American history.
In a step in the right direction, the Treasury Department’s Financial Crimes Enforcement Network (known as FinCEN) issued a sweeping advisory on Aug. 28 warning that Chinese money laundering networks now represent “one of the most significant money laundering threat actors facing the U.S. financial system.” Few Americans have heard of these Chinese networks, but they are using our local, regional and national banks to scrub Mexican cartel cash clean.
The government must do more to shut them down.
The numbers are staggering. Alongside its advisory, FinCEN released a financial trend analysis based on more than 137,000 suspicious activity reports filed between January 2020 and December 2024. Those reports flagged transactions totaling more than $312 billion across more than 1,000 financial institutions in the United States. That includes $33 billion in cash deposits linked in part to Chinese nationals with no verifiable income, $53.7 billion in questionable real estate transactions, and $9.7 billion in potentially fraudulent import-export schemes.
One laundering ring appears to have processed $6 billion through 7 million credit card charges. Another $13.8 billion may have been moved through the personal accounts of Chinese students. In New York alone, 83 adult and senior daycare centers were linked to $766 million in suspicious flows.
What emerges is a picture of a money laundering crisis fueling a drug crisis with a sprawling illicit financial infrastructure hiding in plain sight.
Here’s how it works: After Mexican cartels sell fentanyl or other illicit goods in the U.S., they are left with piles of cash that need to be laundered. But Mexico’s banking rules make it difficult to deposit dollars back home. That’s where Chinese money launderers step in.
The cartels essentially hand over their dollars to Chinese brokers in the U.S. who arrange “mirror transactions” in which cartel counterparts in Mexico receive the equivalent value in pesos (minus a laundering fee) while the dollars physically remain in the U.S. The U.S.-based Chinese brokers then resell those dollars to Chinese nationals seeking to evade Beijing’s tight capital controls and move their money offshore.
On the other side of the mirror, Chinese buyers transfer renminbi inside China to settle their purchases. All the while, any trace of the original cartel-linked drug trade disappears.
To its credit, the Trump administration has taken meaningful steps to combat cartel activity and, specifically, their leading role in the production and distribution of the drug fentanyl into the United States. The administration imposed tariffs on Chinese goods in part as a rebuke to Beijing’s role in the fentanyl epidemic.
The administration also designated Mexican cartels as foreign terrorist organizations and recently barred U.S. banks from transacting with three Mexican financial institutions accused of facilitating payments to cartel-linked precursor chemical suppliers in China. The latest FinCEN advisory goes further, pressing financial institutions to flag “unexplained wealth,” such as Chinese-national students purchasing luxury real estate in the U.S. despite a lack of commensurate income.
These actions suggest a strategy may be coming into focus, but more must still be done to target the financial infrastructure moving billions in cartel cash within the U.S. Following multiple sanctions designations targeting Chinese chemical companies and related networks involved in fentanyl distribution, the Biden administration moved in July 2024 to sanction members of a Chinese money laundering organization with ties to the Sinaloa Cartel. President Trump, however, has yet to similarly sanction such entities.
The Trump administration should move quickly to sanction both the Chinese precursor chemical companies tied to the fentanyl trade and the individuals and entities responsible for Chinese money laundering network operations in the U.S., Mexico and China. This would close a critical gap in enforcement and reinforce FinCEN’s message: The financial arteries enabling the fentanyl trade run not only through Mexico, but through China and Main Street USA.
That’s the point Washington must not lose sight of. The only way to sever this financial lifeline is by going straight at the infrastructure that enables it. That means sanctioning Chinese brokers, prosecuting U.S.-based enablers and cutting off shell companies operating out of opaque jurisdictions. It means treating every suspicious transaction, every anonymous trust and every unexplained real estate deal as a potential node in the fentanyl-fueled drug economy. Otherwise, cartel cash will keep flowing and innocent Americans will keep dying.
Max Meizlish, who previously worked in the U.S. Treasury’s Office of Foreign Assets Control, is a senior research analyst for the Foundation for Defense of Democracies‘ Center on Economic and Financial Power, where Elaine Dezenski is senior director. Dezenski is also a former deputy and acting assistant secretary of Homeland Security.