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Networks linked to China may have laundered some $300bn through US banks in the past five years, according to the US Treasury, warning institutions to be vigilant to the schemes that often benefit Mexican drug cartels.
The US Financial Crimes Enforcement Network (FinCEN) said on Thursday that about $312bn of suspicious transactions associated with suspected Chinese money laundering networks had been reported between January 2020 and December 2024.
It said the groups are heavily utilised by Mexico-based cartels, often using money mules that report their occupation as students, housewives or retired people and accumulate large amounts of unexplained wealth.
FinCEN said on Thursday that Mexico’s ties to Chinese money laundering groups had been driven in part by Mexican laws that restrict dollar deposits to crack down on the drug trade.
Demand for the synthetic opioid fentanyl has boomed over the past decade in parallel with the use of Chinese underground banking networks to clean the money. The money laundering groups have also been fuelled by Chinese citizens seeking to evade their country’s strict capital controls.
Under the scheme, brokers with associates in all three countries manage a complex set of foreign exchange transactions. They often take dollars from drug dealers in the US, pay them in pesos in Mexico, while taking in renminbi from Chinese citizens.
Many of the precursor chemicals used to make the drug are shipped from China into Pacific Mexican ports, where the largest groups — the Sinaloa cartel and Jalisco New Generation cartel — dispute territorial control.
US President Donald Trump’s administration has made trade that involves Mexico and China one of his highest priority issues, and has clamped down on fentanyl entering the US.
Mexican criminal lawyer Ilan Katz said the FinCEN advisory “seems to have both a political angle and a law enforcement angle”.
“In the end, it creates more turbulence with anything related to China . . . it adds distrust to the Chinese market,” he said.
The US government in February designated eight Latin American drug trafficking groups as terrorist organisations, opening the door to taking military action against them.
In June, the Trump administration imposed sanctions on three Mexican banks it said were involved in the trade, spooking the Mexican financial sector.
Trump has been putting increasing pressure on President Claudia Sheinbaum to accept a greater role for the US military in fighting the cartels, saying she was so scared of the groups “she couldn’t walk”.
The US has long struggled to co-ordinate a trilateral response to the fentanyl trade amid broader tensions.
Sheinbaum’s government has stepped up arrests and drug seizures in her first year in office while the Chinese government has highlighted greater enforcement of the precursor chemicals used to make fentanyl.
The Chinese ambassador to Mexico posted on X earlier this year that the US was scapegoating China for its own problems.
