21 June 2024
FT Film (2024) ¦ Chinese brokers launder hundreds of millions for global crime groups
Chinese brokers quietly laundering hundreds of millions for global crime groups
Chinese underground banking networks have become central to laundering drug proceeds, enabling Mexican cartels and other transnational criminal groups to move vast sums of money with speed and anonymity. Starting in the 1990s as Chinese commerce expanded abroad, an informal system of money exchange — often called mirror transfers — developed to help businesses and individuals move value that could not pass through official channels. Over time that system professionalised and became deeply integrated with organised crime networks worldwide, offering a reliable mechanism for converting cash generated by illicit trades into legitimate financial assets. Mirror transfers operate without physical cross-border movement of funds. Cash deposited into one branch of an underground bank is matched by disbursements from another branch elsewhere; the ledger balances, but no traceable transfer crosses jurisdictions. This makes detection extremely difficult for authorities and allows criminal organisations to conceal the origin and destination of proceeds. Law enforcement investigations and undercover operations in cities such as New York and Flushing, Queens, have repeatedly uncovered stash houses full of cash, coordinated courier drops, and complex front businesses — from money service providers to multi-licensed shops that conceal laundering operations behind legitimate activity.
The shift in the drug trade caused by fentanyl production and distribution accelerated the reliance on these networks. Mexican cartels producing fentanyl and other illegal drugs began partnering with Chinese money brokers who could launder US dollar proceeds back to cartel command structures far more cheaply and efficiently than previous laundering methods. Broker fees reported at 1–2 percent dramatically raised cartel profits and reduced their exposure to traditional laundering risks. Transactions are often coordinated through encrypted messaging platforms and social networks, where dollars are advertised for sale to Chinese nationals seeking to invest in the United States; the result is rapid settlement across continents within days.
US federal law enforcement created special counter-threat initiatives, notably Project Sleeping Giant, to aggregate intelligence, share investigations across divisions and geographies, and pursue high-level brokers such as Zhishi Li, whose networks spanned casinos, front companies and transnational triad links. These operations revealed the scale, discipline and sophistication of the laundering enterprises and exposed the challenge of prosecuting and disrupting them: language and cultural barriers within agencies, insufficient integration across Treasury, FBI and other enforcement bodies, and a lack of resources dedicated to tracking informal value transfer systems.
Experts warn that the phenomenon is global. In the UK and Europe, underground banking enables capital flight from China and helps criminals settle cross-border value by pairing cash pools in jurisdictions such as the UK, Mexico and China. Organised crime groups exploit gaps in financial onboarding and employ tactics including money mules, multiple small transfers to avoid detection (smurfing), and the use of electronic money institutions with lighter compliance checks. The result undermines banking integrity and facilitates the movement of hundreds of millions — potentially billions — in illicit value each year.
The human cost is stark. Fentanyl overdose has become a leading cause of death for Americans under 50, and communities across the US are seeing surges in fatal and non-fatal overdoses. Local law enforcement, coroners and families attest to the scale of the crisis, while federal testimony highlights the national security implications. At the same time, pressures within China — from capital controls to political crackdowns on entrepreneurs — have increased incentives for capital flight, swelling demand for underground networks that can quietly reallocate value abroad.
Tackling this threat requires coordinated international action, enhanced intelligence-sharing, stronger financial controls and more Mandarin-capable investigators who understand the cultural and technological means these networks use. While some bilateral cooperation with Chinese authorities has restarted, law enforcement leaders describe the effort as an uphill battle: technology advances, criminal groups become more interconnected and sophisticated, and illicit money continues to flow. Without substantial, sustained global effort to close the channels that enable informal value transfers, the laundering networks that feed organised crime and fuel drug epidemics are likely to persist.