How Chinese Criminals Secretly Move Millions for Mexico Cartels
While the involvement of Chinese money-laundering rings in handling drug proceeds from Mexico is nothing new, a number of recent court cases in the United States have revealed crucial information about how these schemes work.
InSight Crime looks at how colossal amounts of money are
being laundered, the seemingly legitimate businessmen behind it all and why US
prosecutors are stumped about how to proceed.
1. The Launderers
In late April, a US-based Chinese citizen, Gan Xianbing, was
sentenced to 14 years in prison for running a scheme where money from Mexican
criminal groups was picked up in Chicago, transferred to bank accounts in China
and then ultimately sent back to Mexico.
In 2018, Gan handled approximately $534,206 in drug money
before being arrested at Los Angeles Airport in November 2018, during a layover
while flying from Hong Kong to Mexico.
Gan has since become the most well-known, but far from the
only, Chinese money launderer connected to some of Latin America’s most
dangerous criminal groups, including the Sinaloa Cartel.
“The defendant was part of a recent phenomenon in which a
relatively small network of Chinese money brokers based in Mexico have come to
dominate international money laundering markets,” stated Assistant US Attorneys
Sean J.B. Franzblau and Richard M. Rothblatt in Gan’s sentencing document.
Two other key figures have emerged since Gan’s arrest, two
Chinese citizens, Pan Haiping and Long Huanxin. Both men are believed to have
been working with Gan, handling the drug money proceeds received in Chicago and
ensuring their laundering through Chinese bank accounts. They ensured that no
money was ever transferred between China and the United States, helping them to
avoid detection. Long was arrested in February 2020 at Vancouver airport in
Canada before being extradited to the United States on charges related to
Gan’s. Pan Haiping has been arrested in Mexico and is awaiting extradition to
the United States.
These men presented themselves as legitimate businessmen and
had little to no entanglements with the law. Long was the purchasing manager
for his family’s toy and clock business, selling products in Mexico, where he
had investments in hotels and restaurants. Gan owned a seafood business in
Guadalajara, exporting jellyfish to China, according to Reuters.
“Many of these brokers are also engaged in legitimate
business, and use that business as cover for and to further money laundering
activity,” said US attorneys in Gan’s sentencing memorandum.
While this ring is the latest involving Chinese money
launderers, it is not the only one to be uncovered.
Last September, Wu Xueyong was sentenced to five years in
prison by a federal court in Virginia and agreed to forfeit over $4.2 million
in laundered drug proceeds coming from cocaine trafficking in the United
States. Wu’s scheme worked identically to Gan’s with the money never actually
being transferred from China to the United States.
2. The Techniques
Large sums of money being transferred between China and the
United States on a regular basis might raise suspicion. Therefore, these
launderers chose a scheme that ensured this would never happen.
One of Gan’s associates, a Singaporean national named Seok
Pheng Lim testified to prosecutors that she was coordinating several weekly
pick-ups from representatives of Mexican criminal groups, made in cash ranging
between $150,000 and $1 million, with an average of $500,000. These were made
in large cities including Chicago, New York and Atlanta. Lim’s involvement
lasted an estimated 63 weeks between March 2016 and May 2017, during which time
she and her other couriers picked up in excess of $25 million, prosecutors
estimated.
Once the cash was in the hands of the launderers, they
contacted one among a network of Chinese-owned businesses in the United States
and Mexico. They asked them to transfer a correspondent amount of money through
Chinese banking apps. This happened entirely through the Asian country’s
domestic banking system and outside the purview of US authorities.
Gan actually mentioned this in his defense, according to
Reuters. His lawyers stated that, far from being a money launderer himself, he
had been duped by Pan Haiping and allowed his Chinese bank account to be used
for these transfers.
This technique also allows the laundering process to avoid
scrutiny in China. The country’s financial regulators limit private individuals
from handling more than $50,000 in foreign currency and any transfers
surpassing this limit must be granted special dispensation. However, there is
no such limit on domestic transfers.
3. China’s Silence
The sheer amounts of dirty money being laundered in this way
are a cause for alarm among US prosecutors. And yet these schemes are not new.
In October 2020, an unsealed indictment from the US Justice Department charged
six Chinese nationals with laundering over $30 million for Mexican drug
traffickers over a period of 12 years.
But regulating the use of Chinese banking apps from the
United States and Mexico is no easy task.
China has not seemed eager to help. Two sources within the
US justice system told Reuters in December that requests for support had not
been answered.
The Chinese government disputed this account and stated no
such request was received. According to a statement from the country’s Ministry
of Foreign Affairs, other requests from the United States related to money
laundering had concerned “legitimate enterprises and individuals” in China.
It is currently uncertain to what extent the businesses and
people used to move this money within China are even aware of the illegal
nature of these transactions, making it all the more difficult to crack down on
these schemes.
“It’s the most sophisticated form of money laundering that’s
ever existed,” one of the US sources told Reuters.
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