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China: Behind Cartel Money Laundering around the World

US authorities have described the strategy used as “the most sophisticated form of money laundering that has ever existed”

The United States is persecuting Chinese “money brokers,” which authorities say represent one of the new and sophisticated threats in the war on drugs. US authorities reported Chinese money laundering gangs are avoiding bank fees and charge low fees of around 10%, making the service cheaper for the cartels.

Chinese businessman Gan Xian Bing “will be sentenced in a Chicago court for laundering the assets of a Mexican drug cartel by using Chinese banking applications to send money from the United States to China and then to Mexico,” Reuters reported.

Is the Chinese Communist Party complicit in money laundering?

In the midst of tense relations between the U.S. and China, where both countries have imposed trade restrictions and tariffs, China is benefiting drug cartels. While criminal gangs are evading the banking system because U.S. and Mexican authorities are implementing measures to pursue illicit money, in China, public banks such as the Bank of China are used to carry out laundering. 

The Chinese Communist Party regulates the Chinese banking system. As well as media, the communist regime monitors all banking operations and local and foreign companies based in China.

In fact, mobile phone applications have served to bring government control to the local market, where cash is normally used. Although China controls every yuan that moves, the Beijing regime has not collaborated efficiently with the American authorities in tracking money laundering. 

Latin American Drug Cartels Partnering with Chinese Businessmen to Money Laundering

According to Reuters, it is the small Chinese companies in United States and Mexico are responsible for moving the funds. Then “most of the contact with the banking system happens in China.”

China, Mercado Chino en NY
The World Bank estimates that in 2019, 67 billion dollars in remittances were sent to China from the United States. (Efe)

This is not the first time Latin American drug traffickers use China for money laundering without any intervention by regime authorities. According to the U.S. Drug Enforcement Administration (DEA), since 2004, international money laundering and drug trafficking organizations have carried out laundering activities through trade between China, Colombia, United States, Spain, Ecuador, Venezuela, and Mexico.

In addition to currency transfer and exchange, traffickers have used Chinese trade to launder money. For example, a group led by Colombian citizens based in Guangzhou, China, laundered money “by using bank accounts in Hong Kong and China of drug trafficking organizations to finance counterfeit goods in China, which were then sent to Latin America for resale,” according to DEA investigations. 

Mexico’s Financial Intelligence Unit (FIU) said publicly that Chinese citizens laundering money for the New Generation Jalisco Cartel (CJNG) used the drug proceeds to “buy shoes in bulk in China and then resell them in Mexico to obtain the cash.”

Chinese exports to Mexico, including electronics, clothing, and other consumer goods, have nearly doubled in the past decade to reach $83 billion by 2019, officials told Reuters.

Disposable Mobile Phones and One-Dollar Notes to Complete Operations

The U.S. Government said, “Chinese businessman Gan Xian Bing laundered between $25 million and $65 million from 2016 until he was arrested.” The businessman’s case came to light according to Lim Seok Pheng’s testimony, a member of the New York-based network, who testified at Gan’s trial. Lim tells the story step by step and their respective roles in the organization.

1. Collecting money 

According to Reuters research, in Chicago and New York, “between $150,000 and $1 million were collected at a time. Lim was waiting in a public place, with a disposable phone, a code name, and the serial number of a real dollar note.”

Lim told authorities that the people sent by the Mexican cartels “called Lim’s disposable phone and used the code name to identify themselves and set up the meeting,” where Lim handed over a one-dollar note with the corresponding serial number as a ‘receipt’ to verify if that delivery had been successful.

2. Recruiting business in the Chinese diaspora

To disappear this money, US authorities said, “Chinese traders in the US have long been involved in off-record “currency exchanges” to avoid heavy bank charges.”

U.S. authorities have defined this process as a “mirror transaction,” where “the Chinese businessman opens a currency conversion application on his phone to obtain the exchange rate between the US dollar and Chinese yuan in order to take possession of the US dollars and, at the same time, transfer the Chinese yuan equivalent of his own account in China to the bank account number provided by Gan.”

3. A successful result

Chinese gangs’ money launder allows cartels to transfer funds abroad without involving financial institutions and avoiding legal intervention by the US government, thus managing to return almost 100% of the money to the drug traffickers.

China, the money laundering cradle for other dictatorships 

Despite belonging to all the organizations that watch over human rights and economic transparency, China continues to support dictatorships that seek to evade sanctions. 

Experts said that, with the help of China, North Korea continued laundering this year worldwide, and they were investigating how Pyongyang laundered virtual assets.

In March, the U.S. Department of Justice “accused two Chinese citizens of laundering more than $100 million in cryptocurrencies on behalf of North Korea.” U.S. authorities have previously imposed sanctions on Pyongyang’s use of hackers to circumvent international sanctions against the communist dictatorship.

For its part, the United Nations (UN) reported that “North Korea generated an estimated $2 billion for its weapons programs by using widespread and increasingly sophisticated cyber attacks” to steal financial information from banks and crypto-currency exchanges.

On the other hand, Iran uses the Bank of China to transfer funds to companies linked to the Islamic Revolutionary Guard forces, also known as Quds.

“The Quds provide arms, aid, and training to pro-Iranian militant groups in the Middle East, such as “Hezbollah”, “Hamas” and “Shia” Muslim militias in Iraq. They have also armed and trained government forces in the Syrian civil war in violation of a UN arms embargo,” says the report

Intelligence report reviewed by Reuters says Shenzhen Lanhao is only one of several companies in China receiving money from Iran through a Chinese bank.  

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