FinCEN Warns that Mexican Drug Cartels are using Chinese Money Launderers
Commentary by Jeff Ziesman
FinCEN issued an advisory urging financial institutions to identify and report suspicious transactions tied to Chinese Money Laundering Networks ("CMLNs").
According to the FinCEN advisory, the CMLNs’ money laundering operations are effective because of their "willingness to absorb financial losses and assume risks for [Mexican drug] Cartels and other clients," and their ability to "operate around the world." FinCEN described how these networks rely on informal value transfer systems, trade-based money laundering and mirror transactions to avoid detection. FinCEN explained a process by which Chinese nationals living in the US, including students, are recruited to act as money mules. FinCEN said that CMLNs often use counterfeit Chinese passports, open bank accounts under false pretenses, deposit large sums of cash, purchase cashier's checks and invest in real estate to disguise the origin of the funds. FinCEN stated that some networks also used luxury goods and electronics as part of their laundering schemes.
FinCEN highlighted an investigation, dubbed "Operation Fortune Runner," which uncovered over $50 million in drug proceeds laundered through Chinese underground banking systems. The defendants allegedly used cryptocurrency, structured deposits and shell companies to conceal the money’s origin.
FinCEN asked financial institutions to monitor for red flags, such as unexplained wealth, frequent cash deposits and wire transfers to high-risk jurisdictions. FinCEN also reminded institutions of their obligations under the Bank Secrecy Act, including due diligence requirements and information-sharing protocols.
Commentary
This Alert continues FinCEN’s focus on transnational activity. Apart from Executive Order 14157, transnational activity was one of FinCEN’s priorities in the 2021 Priorities list, and it clearly remains a priority through the present day.
FinCEN regularly attempts to pinpoint criminal activity and priorities through review of suspicious activity reports ("SARs"). This SAR review typically has a significant sample size, both in terms of SARs filed and the time frame in which the SARs were filed. This recent Alert, which followed such a comprehensive SAR review, highlights continued transnational activity with a variety of interrelated criminal activities. This, in turn, dictates FinCEN’s continued focus on these types of activities.
Also of note is that FinCEN clearly remains concerned about high-value, all-cash, real estate purchases with illicit funds. This concern previously led to the FinCEN’s Residential Real Estate Reporting rule which is being challenged in court. For many of these same reasons, FinCEN also has in place Geographic Targeting Orders ("GTO"), which require title insurance companies to collect and report information about the persons involved in all-cash residential real estate transactions. In 2025, FinCEN issued a specific GTO relating to Mexico-based cartels and other criminal actors engaging in criminal activities along the southwest border of the United States. This, too, is just another recent example of FinCEN’s continued efforts to specifically target transnational criminal activity.