AML Debate Shifts From Transactions to Hidden Networks

The title of Tuesday’s House Financial Services Oversight and Investigations Subcommittee hearing pointed toward Chinese money laundering networks and cartel financing.

But witness testimony and lawmaker exchanges centered on a broader challenge: whether banks, FinTechs and law enforcement can still effectively follow the movement of money through an increasingly complex financial system.

Witnesses described a landscape where criminal proceeds move through shell companies, real estate transactions, digital channels, trade networks and informal value-transfer systems that often leave only fragments of a trail. Lawmakers repeatedly returned to questions of ownership, transparency and whether current anti-money laundering tools still fit the way money moves today.

The Growing Challenge of Following Illicit Funds Through Modern Financial Networks

Several witnesses argued that financial crime has become harder to detect because value increasingly moves through networks rather than straightforward account-to-account transfers.

John Cassara, a veteran anti-money laundering investigator and former Treasury official, delivered a sharp assessment of the current system.

“To be caught and convicted for money laundering in the United States, a criminal has to be really, really stupid or really, really unlucky,” Cassara told lawmakers. He argued that existing anti-money laundering frameworks have struggled to keep pace with criminal organizations that use mirror transactions, trade-based money laundering and other mechanisms that transfer value without creating traditional payment trails.

Liana Rosen, a specialist in international sanctions and financial crimes at the Congressional Research Service, outlined the variety of channels used by money laundering networks. Her testimony covered underground banking systems, trade-based money laundering, cryptocurrencies, money mules, shell companies and real estate purchases.

A practical implication emerged for financial institutions: detecting suspicious transactions matters, but understanding how those transactions connect across multiple entities is becoming essential.

Beneficial Ownership and the Missing Link in Anti-Money Laundering

Some of the hearing’s most substantive exchanges focused on beneficial ownership.

Rep. Nikema Williams, D-Ga., raised concerns about shell-company ownership and asked what communities lose when property owners are impossible to identify.

Cassara’s answer was direct. “The one missing link that law enforcement needs is beneficial ownership information,” he said. “That’s the one missing piece that we need.”

Williams then asked Rosen how ownership reporting requirements could help investigators trace illicit funds moving through real estate. Rosen pointed to centralized ownership databases as tools that help law enforcement connect assets and transactions to the individuals who ultimately control them.

For banks and FinTechs, that issue sits at the center of customer due diligence and Know Your Customer obligations.

Criminal Networks See Across Institutions. Banks Often Cannot.

Another theme emerged during discussions about the limits of transaction monitoring.

Rep. Barry Loudermilk, R-Ga., asked Rosen whether Chinese money laundering networks were exploiting sectors outside traditional banking, including real estate and money services businesses.

“Yes, all of the above have been involved in Chinese money laundering networks,” Rosen replied. She later noted that Treasury assessments have found these networks continue to “adapt and evolve to avoid law enforcement detection.”

Louis DeTitto, CEO of MissionLytics, argued that criminals frequently have a broader view of financial activity than the institutions trying to stop them.

“The core difficulty in disrupting these networks lies in institutional fragmentation,” DeTitto noted in his testimony. Banks, regulators, law enforcement and intelligence organizations often see only pieces of a larger network, allowing criminal organizations to exploit gaps between institutions and jurisdictions.

Rather than relying solely on transaction alerts, DeTitto urged greater use of network-level analysis that identifies relationships across accounts, entities and jurisdictions. He also advocated broader information sharing and analytical tools capable of surfacing patterns that would otherwise stay hidden.

AI and Network Intelligence as the Next Phase of Financial Crime Detection

The hearing also examined whether technology could help close those visibility gaps.

Leland Lazarus, founder and CEO of Lazarus Consulting, cited Treasury findings showing that suspected Chinese money laundering network activity was linked to 137,153 Bank Secrecy Act reports totaling roughly $312 billion in suspicious activity between 2020 and 2024.

Lazarus argued that investigators should identify “network hubs rather than just isolated transactions” by combining suspicious activity reports, beneficial ownership records, sanctions data, customs information and law enforcement intelligence.

That approach mirrors a broader shift across financial services. According to PYMNTS Intelligence’s “2025 State of Fraud and Financial Crime in the United States,” 68% of financial institutions increased fraud detection spending. AI and behavioral analytics have become key components of fraud prevention strategies. The report also found that unauthorized-party fraud now accounts for 71% of fraud incidents and losses.

What the Hearing Means for Banks and FinTechs

The hearing focused on cartel financing and Chinese money laundering networks. But the testimony repeatedly returned to questions that reach across the payments ecosystem.

Rosen stressed the growing variety of channels used to move illicit funds. Cassara focused on ownership transparency and the gaps in current anti-money laundering frameworks. DeTitto argued for network-level intelligence that connects fragmented information. Lazarus pointed to AI-driven systems built to identify relationships hidden within large volumes of data.

Taken together, their testimony suggested that the next phase of anti-money laundering will hinge on how value moves across networks — and where seemingly unrelated activities converge within the broader financial system.