What Are Chinese Money Laundering Networks and How They Operate

In August 2025, FinCEN - the US bureau of the U.S department of the Treasury - released an advisory warning financial institutions about the growing threat of Chinese Money Laundering Networks (CMLNs). These networks are working directly with major Mexican drug cartels to clean large amounts of drug money inside the United States - right now, in real time.

This isn’t just a U.S. issue. Similar Chinese networks are operating in many other countries, including Canada, the UK, Australia, and across Southeast Asia. While the systems may look slightly different from place to place, the logic is the same: move money quietly, avoid government controls, and clean the proceeds of crime.

Why Chinese Money Laundering Networks Exist

To understand why CMLNs are so active, you need to look at two key issues.

1. In China, strict currency controls limit what people can do. Chinese citizens are only allowed to exchange up to $50,000 into foreign currency each year. For those who want to invest abroad, pay for overseas education, or buy real estate in the U.S., that’s not enough. So many turn to underground systems to get around these rules.

2. Meanwhile, Mexican drug cartels are holding huge amounts of U.S. dollars from selling drugs inside the U.S. But they can’t easily get that money back to Mexico or put it into the formal banking system - Mexican banks also restrict U.S. dollar deposits because of anti-money laundering laws.

So, CMLNs step in as the middlemen. They help Chinese citizens get access to dollars and help the cartels turn their drug money into clean, usable funds.

How the Scheme Works

Here's a simplified version of how a typical deal might work:

1. A Mexican cartel delivers drug cash (in U.S. dollars) to a CMLN operator in the U.S.

2. That operator advertises that they have U.S. dollars for sale. Anyone who wants to buy them must pay in China, in renminbi (RMB).

3. A Chinese buyer sends RMB to a contact in China who is working with the CMLN.

4. Once the RMB is received, the CMLN gives the U.S. dollars (which came from drug sales) to the buyer’s contact in the U.S. - often a friend, student, business associate, or even a luxury goods reseller.

At no point is the banking system involved. No wire transfers, no SWIFT, no obvious transaction trail.

What you have is a complete currency swap - RMB in China for USD in the U.S. - that satisfies both the buyer and the cartel.

How Chinese Money Laundering Networks Operate in the US

Why This Model Is So Effective

Chinese Money Laundering Networks are hard to catch because they don’t move money in the usual ways. Instead, they move value through informal channels.

They rely on:

• Personal networks and trust, rather than formal contracts

• Cash couriers, money mules, and front companies to physically move or place cash

• Trade-based money laundering, where goods like electronics or luxury handbags are bought and shipped overseas to move value without using banks

• Students and recent graduates - often on visas - who are easy to recruit and may not even understand they’re participating in money laundering

• "Daigou" buyers, who buy U.S. luxury goods to resell in China, helping convert dirty money into goods that can be sold for clean money

A Real Case: Operation Fortune Runner

According to the advisory, between 2019 and 2023, a group in Los Angeles worked with the Sinaloa Cartel to move over $50 million in drug money. They handed off bags of cash, used real estate deals, bought luxury goods, and even used cryptocurrency to clean the money.

The group had strong ties to Chinese underground banking systems. They collected drug cash, helped Chinese nationals get around currency controls, and made sure everyone got what they wanted - the cartel got clean money, and the buyers got U.S. dollars they couldn’t get through official channels.

What Should AML Professionals Look For?

FinCEN flagged several red flags in its advisory for AML professionals to look for. Here are a few examples:

• A customer with a Chinese passport who claims to be a student, retiree, or housewife, but is receiving or moving large amounts of money.

• Someone making regular cash deposits that don’t match their stated income or employment.

• Use of cashier’s checks to pay for real estate or luxury items.

• Frequent peer-to-peer transfers or credit card payments with no clear explanation.

• Businesses that sell high-end goods and receive money from overseas, but don’t seem to be buying inventory.

In many cases, people involved in these transactions say they’re just helping someone get money out of China. But the truth is, the money they’re receiving in the U.S. is from drug sales.

Why This Matters

Chinese Money Laundering Networks are one of the most serious threats to the U.S. financial system right now. They make it possible for cartels to keep selling drugs and for high-net-worth individuals to bypass national laws. The system is efficient, global, and very difficult to detect if you’re only looking at one part of the chain.

AML professionals, whether in the U.S. or elsewhere, need to understand this ecosystem. These networks are decentralized, fast-moving, and adaptable. And they’re not going away anytime soon.