After President Trump returned to the White House, one of his key agendas was to focus on preventing drugs like Fentanyl from flowing into the United States. This included cutting off the synthetic chain of Fentanyl and targeting drug trafficking groups, even considering the use of tariff measures.
However, a more challenging aspect of this initiative is how to dismantle the network where the dirty money earned from Fentanyl sales is laundered and reintroduced into circulation. An investigation revealed that underground money exchange shops operated by Chinese Americans have become a crucial money laundering pathway for this illicit income.
Despite a slight decrease in the number of Americans dying from Fentanyl overdoses in the past year or two, which may be attributed to the widespread use of opioid receptor antagonist Narcan, Fentanyl continues to disrupt and destroy the lives of Americans. Last year, the DEA seized over 55 million counterfeit pills and nearly 8,000 pounds (3,600 kilograms) of Fentanyl powder. According to the DEA’s estimate, this quantity is enough to kill every person in the United States.
As reported by The Wall Street Journal, a DEA official testified before the House Select Committee on the Chinese Communist Party last year that global drug sales revenue could reach $500 billion to $750 billion annually. The official believes a significant portion of this amount is laundered through Chinese money laundering networks.
DEA Acting Administrator Jarod Forget stated in an interview, “The Fentanyl crisis starts in China and ends in China.” He pointed out that Fentanyl precursors and synthetic materials originate from China, and the dirty money earned from Fentanyl sales is laundered through China.
According to U.S. law enforcement officials, the operation of Chinese money laundering networks operates as follows:
– Mexican drug cartels provide their dirty U.S. dollars earned from selling Fentanyl to currency brokers working for Chinese money laundering networks, all within the United States.
– Chinese currency brokers advertise U.S. dollars on WeChat. Chinese clients wanting to buy dollars transfer Chinese yuan plus a high commission to the broker’s bank account in China.
– The broker then provides the dollars to Chinese clients who wish to spend in the U.S., buy real estate, pay university fees, gamble, or make other investments.
U.S. officials noted that some Chinese citizens using this service to purchase dollars may not be aware that it involves drug transactions.
Due to capital controls imposed by the Chinese government, Chinese citizens can only buy up to $50,000 worth of foreign currency annually from official channels. With the slowdown of the Chinese economy, downturns in real estate and stock markets, more Chinese individuals are seeking to transfer funds overseas to protect their wealth. Underground money exchange shops offer a means for this fund transfer, with Fentanyl dirty money being effectively laundered through this process.
Therefore, the money deposited into the Chinese currency brokers’ bank accounts in China is already “cleaned”. Next, the Chinese broker needs to deliver the yuan to Mexican drug traffickers.
To achieve this, the Chinese broker can use a company exporting Chinese goods to Mexico, exchange the yuan for pesos in Mexico, and then deliver it to the cartels. Alternatively, the cartels can use yuan to continue purchasing precursor chemicals for synthetic Fentanyl from China, thus allowing the drugs and funds to circulate again.
Chinese brokers often charge high commissions when selling dollars to Chinese clients using underground money exchange shops, as many Chinese individuals desire dollars. However, the commissions they charge the Mexican drug traffickers are minimal.
When Colombians controlled the money laundering black market in South America, their commissions ranged from 7% to 10%. In contrast, Chinese individuals charge only 1% to 2%, giving them a competitive advantage in the money laundering market. This has led to instances of Chinese money launderers accepting dirty money from drug transactions throughout the United States.
Craig Timm, a former U.S. DOJ anti-money laundering official now with the Association of Certified Anti-Money Laundering Specialists, stated, “While not the most significant, it is certainly one of the most important money laundering methods.”
U.S. officials emphasized that Chinese currency brokers have long been part of the underground money exchange system serving Chinese immigrants and expatriates in the U.S., and now they have become the preferred partners for Fentanyl traffickers and other drug trafficking groups in need of money laundering services. This emergent partnership further positions China as a crucial transit hub for the flow of dirty money in the U.S. Fentanyl crisis.
According to U.S. law enforcement officials, combating Chinese money laundering networks involved in Fentanyl drug trades has become a new front in the U.S. war on drugs.
In one case, after years of monitoring suspects, DEA arrested two Chinese nationals involved in money laundering in 2022, both of whom were later convicted and sentenced.
One morning in October 2022, under police surveillance, a man drove a white pickup truck into a parking lot of a global fresh market in San Gabriel, California. He parked next to a blue Maserati where he had a brief discussion with a woman inside the car before placing a large black bag on the rear seat of the car. From advance surveillance, DEA learned that the bag contained approximately $300,000 in cash.
Subsequently, U.S. agents tracked the Maserati to a residential area, where it was revealed to be a transaction point for an underground money exchange shop. Following this, authorities intercepted a driver leaving the residence and found $25,000 in cash.
Both the white pickup truck driver and the Maserati driver were convicted. The man involved in the pickup truck was sentenced to 10 years in prison for his role in laundering $62 million.
A DEA task force spent several years investigating this money laundering group, led by a Chinese man named Sai Zhang. Last year, this investigation led to the indictment of 24 individuals, including Zhang, who faces charges of money laundering, operating an unlicensed money transfer business, and aiding drug trafficking. Zhang has pleaded not guilty and awaits trial.
(Credit: This article references reporting from The Wall Street Journal)