Chinese Money Laundering Networks Flagged as ‘Severe Threat’ by FinCEN

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has issued a warning that Chinese money laundering networks are now among the most significant threats to the U.S. financial system, fueling operations of Mexico’s most powerful drug cartels.

In a new advisory released Thursday (August 28), FinCEN said groups including the Sinaloa Cartel and the Jalisco New Generation Cartel are increasingly using Chinese money laundering networks to clean billions in drug proceeds. The networks have become effective partners because they can move cash quickly, absorb losses and leverage demand from Chinese nationals seeking to bypass Beijing’s strict currency controls. By pairing cartel dollars with Chinese demand for U.S. currency, these networks have created what FinCEN called a “mutualistic relationship” that strengthens both sides.

The 15-page report outlines how these networks operate. They rely on informal value transfer systems, “mirror” transactions and trade-based money laundering schemes to shift funds across borders without physically moving cash. Some recruit Chinese students in the U.S. to act as money mules, depositing cartel cash into U.S. bank accounts and disguising the flows as tuition or living expenses. Others purchase electronics, luxury goods, and real estate with illicit funds, later reselling or exporting those assets to create the appearance of legitimate commerce.

“Chinese money laundering networks are professional money launderers that play a vital role in laundering the cartels’ drug proceeds in the United States,” the advisory said. “This is due to the speed and effectiveness of their operations, as well as their willingness to absorb financial losses and assume risks for the cartels and other clients.”

The advisory also lists “red flag” indicators for financial institutions, ranging from students depositing unusually large sums of cash to small businesses with outsized luxury goods transactions. FinCEN urged banks to reference the identifier “CMLN-2025-A003” when filing suspicious activity reports, and to pay special attention to transactions tied to unlicensed money service businesses, informal transfer systems and trade-based schemes.

FinCEN’s move follows a January executive order that designated several cartels as foreign terrorist organizations, underscoring the administration’s concern that cartel financing now poses not only a criminal but also a national security threat. The advisory ends with a reminder that financial institutions are on the front line of detecting suspicious flows and that voluntary information sharing under existing safe harbors can help expose networks that otherwise thrive in the shadows.