Cartels Exploit U.S. Banks to Launder $312B via Chinese Schemes

US banks have been identified as significant players in laundering $312 billion in illicit funds through Chinese money laundering networks (CMLNs) between January 2020 and December 2024. The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) reported that these networks are primarily used by Mexico-based drug cartels to launder drug trafficking proceeds. FinCEN’s findings, drawn from 137,153 Bank Secrecy Act (BSA) reports filed by financial institutions, highlight the extensive scope of CMLN activity. These networks are also linked to human trafficking, fraud, and real estate schemes involving over $53.7 billion in suspicious transactions.

The FinCEN advisory details how CMLNs exploit regulatory loopholes to facilitate the movement of illicit funds. These networks, often composed of individuals with Chinese passports, engage in trade-based money laundering, money mule schemes, and mirror transactions to obscure the origins of illicit wealth. FinCEN has identified key indicators of suspicious activity, such as account holders in high-risk categories (e.g., students or retirees) managing unusually large volumes of transactions. These networks are further enabled by Chinese currency control laws and Mexican restrictions on U.S. dollar deposits, which push cartels to seek alternative means of laundering.

In response to these threats, FinCEN is urging financial institutions to heighten their vigilance and implement stronger detection mechanisms. The advisory provides a list of red flags to help institutions identify and report potential CMLN activity. This effort aligns with broader Treasury initiatives to modernize financial surveillance and combat transnational criminal organizations. FinCEN also emphasized the importance of international collaboration, noting that dismantling CMLNs requires coordinated action with law enforcement and regulatory partners globally.

At the same time, U.S. regulatory agencies are strengthening their surveillance capabilities to detect and prevent financial misconduct across traditional and digital asset markets. The Commodity Futures Trading Commission (CFTC) recently announced the adoption of Nasdaq’s Market Surveillance platform, which offers advanced analytics, cross-market monitoring, and automated alerts to identify suspicious trading patterns. The platform is designed to address the complexity of modern financial markets, including crypto and prediction markets, and is expected to enhance the CFTC’s ability to detect manipulation and fraud. Nasdaq’s technology is already in use by 50 exchanges and nearly two dozen international regulators.

The CFTC’s move comes as lawmakers consider the CLARITY Act, a comprehensive crypto market structure bill that would define the regulatory roles of the SEC and CFTC. The bill, passed by the House in July 2025, aims to establish a national framework for crypto oversight, including the classification of most cryptocurrencies as commodities. This development has implications for how the CFTC will regulate digital assets and integrate them into broader surveillance systems. The agency is also implementing recommendations from a recent White House crypto report, including measures to strengthen reporting obligations for digital asset venues and enhance blockchain-based regulatory tools.

Meanwhile, a broad coalition of over 100 crypto industry stakeholders, including major firms like Coinbase and Kraken, has urged the Senate to include protections for blockchain infrastructure developers in any finalized market structure legislation. The groups argue that developers should not be held legally responsible for the misuse of their technology by criminals, a stance that contrasts with concerns from figures like Senator Mark Warner, who has emphasized the need for robust anti-money laundering (AML) requirements in the crypto sector. Warner’s support for stricter oversight aligns with broader national security interests, particularly in preventing the use of decentralized finance (DeFi) platforms for illicit financial flows.

The debate over crypto regulation highlights the tension between innovation and oversight. While the industry seeks legal clarity and protections for developers, regulators remain focused on mitigating risks to financial stability and national security. The outcome of these legislative efforts will shape the future of crypto in the U.S., determining whether it integrates more seamlessly into the financial system or faces heightened barriers to growth and adoption.

Source:

[1] FinCEN Issues Advisory and Financial Trend Analysis on Chinese Money Laundering Networks (https://www.fincen.gov/news/news-releases/fincen-issues-advisory-and-financial-trend-analysis-chinese-money-laundering)

[2] CFTC Enhances Market Oversight with Advanced Surveillance Technology Platform (https://www.cftc.gov/PressRoom/PressReleases/9110-25)

[3] Broad Coalition of Crypto Groups Urge Senate to Protect Developers in Market Structure Bill (https://www.pymnts.com/cpi-posts/broad-coalition-of-crypto-groups-urge-senate-to-protect-developers-in-market-structure-bill/)

[4] Crypto Policy in the U.S. Could Shift Due to Opposition from Senator Warner (https://www.radom.com/insights/crypto-policy-in-the-u-s-could-shift-due-to-opposition-from-senator-warner)

[5] FinCEN Issues Advisory and Financial Trend Analysis on Chinese Money Laundering Networks (https://home.treasury.gov/news/press-releases/sb0231)