At the conclusion of talks this month, Treasury Secretary Scott Bessent called money laundering “the result of fentanyl sales,” and said “both the People’s Republic of China’s government and the U.S. government and citizens are hurt” by it.
“We discussed ways we could work together, and the Chinese delegation was very keen to work with us. It was an area of extreme agreement.”
Chinese money laundering gangs, with the knowledge and apparent approval of China’s party-state, have gone international and now handle much of the dirty cash moving around the world. The United States has the means to stop the gangs but has almost always refrained from employing its most effective tools.
Washington knows who the culprits are. On Aug. 28, the Treasury’s Financial Crimes Enforcement Network (FinCEN) released an advisory urging financial institutions to be vigilant to the use of “Chinese money laundering networks” by Mexican drug cartels including several designated as foreign terrorist organizations.
FinCEN also issued a financial trend analysis describing the scope of those networks in the U.S.
Chinese “money brokers,” working for Latin American drug gangs such as the Jalisco New Generation and Sinaloa cartels, have quickly displaced rivals with, as a source told Reuters, “the most sophisticated form of money laundering that’s ever existed.”
The Chinese gangs use burner phones and Chinese banking apps to move vast sums quickly, quietly and securely through China’s state banking system. The Communist Party of China and the Chinese central government tightly control all Chinese banks, and no one could transfer such sums through their networks without the knowledge of the regime and its cooperation.
As a result of state help, the Chinese money launderers in Mexico, in the words of U.S. federal prosecutors, “have come to dominate international money laundering markets.”
John Hurley, Treasury undersecretary for Terrorism and Financial Intelligence, said in the advisory that money laundering linked to Chinese networks “enable cartels to poison Americans with fentanyl, conduct human trafficking and wreak havoc among communities across our great nation.”
He added: “The United States will not stand by and allow nefarious actors to launder illicit proceeds through our financial system.”
But the United States is, in fact, standing by. The Chinese gangs move U.S. dollars, and every dollar transaction, other than those conducted in paper currency, clears through banks in New York.
That fact gives the Treasury the power to stop the Chinese gangs cold.
The Treasury secretary can designate, pursuant to Section 311 of the USA PATRIOT Act, a foreign bank or other institution to be of “primary money laundering concern.”
The designation means that an institution can no longer clear dollar transactions through the U.S. banking system. As a practical matter, that means a designated Chinese bank could not launder U.S. currency.
Why do Chinese banks still think they can handle criminals’ dollars? Because they have been laundering North Korea’s proceeds of criminal and prohibited activities for decades, and Washington has done nothing effective about it.
In June 2017, the Trump administration hit China’s Bank of Dandong, a small institution, with a Section 311 designation for North Korean activity, but Trump’s Treasury in 2018 decided not to enforce money laundering laws against two of the “Big Four” Chinese banks, Agricultural Bank of China and China Construction Bank, which were handling suspicious transactions involving North Korea.
Additionally, a former Treasury official said the Industrial and Commercial Bank of China, the world’s largest bank, appeared to be on the wrong side of the law.
The Obama and Biden administration similarly failed to stop Chinese money laundering. “This failure is a choice,” Joshua Stanton, who writes on American sanctions issues at One Free Korea, said to me. He noted that American administrations have given “de facto immunity” to the Chinese.
Washington has not acted against China’s large institutions for fear of consequences.
“The idea of a U.S. ban was soon shelved, primarily because of fears that punishing lenders of that size might send shock waves through the global financial system,” Bloomberg reported in 2018. Moreover, “officials worried about potential systemic damage and retaliatory measures from China.”
“China’s banks are ultimately functions of China’s party-state with no genuine autonomy from Communist Party committees,” Charles Burton, a former Canadian diplomat in Beijing and now at the Sinopsis think tank, told me this month.
“In 2025, it is long past due for the U.S. government to use this Treasury tool to hit the Chinese institutions financing China’s weapon of mass destruction program of manufacturing and exporting illicit fentanyl precursors,” Stephen Yates, senior research fellow at the Heritage Foundation, told me this month.
FinCEN late last month said it was “raising the alarm on Chinese money laundering networks” because they “pose a significant threat to the U.S. financial system.” It’s about time that Washington matches deeds with words.
An ever-hopeful Washington still believes it can enlist the Chinese regime in the fight against money laundering, but attempting to work with Beijing has been an obvious failure over the course of decades. An increasingly arrogant China is not about to shut down its gangs now.
It’s time for Secretary Bessent to stop talking with China and start closing its dollar laundry. All he has to do is sign designations to unplug Chinese institutions from the global banking system.
Gordon G. Chang is the author of “Red: China’s Project to Destroy America” and “The Coming Collapse of China.” Follow him on X @GordonGChang.