By PAUL O’DONOGHUE, Senior Correspondent
- This article was originally published on August 30, 2025, and is re-published as part of AML Intelligence’s ‘Most Read of 2025’ series
DURING the week U.S. banks received a stark warning – Chinese gangs have laundered up to $312 billion through the American financial system in just a few years.
It’s suspected most of this is moving dirty money on behalf of Mexican cartels. Officials said by doing this, Chinese money laundering networks (CMLNs) “enable cartels to poison Americans with fentanyl”.
FinCEN, the AML (anti-money laundering) unit of the Department of the Treasury, issued an advisory for financial institutions.
The guidance included details of the money laundering techniques used by CMLNs.
We’re going to take a look at some of the most common methods identified by FinCEN.
Trade-Based Money Laundering / credit cards
So-called ‘Trade Based Money Laundering’ often begins with US-based “money mules” depositing cartel drug cash into accounts.
Instead of wiring the money abroad directly, the funds are used to pay down credit card balances.
FinCEN said the cards were used to purchase items, such as cell phones, “in an excessive and repetitive manner”.
The idea is to bulk buy high-value goods, such as phones and luxury watches, which can be easily shipped and resold overseas.
Banks also noted that deposited funds are often from companies “identified as being sellers on third-party websites”. These companies often posted “the same types of items for sale”.
“One BSA filer identified a suspected CMLN that included U.S.-based electronics companies and thousands of Chinese nationals who purchased bulk electronics and gift cards in a massive scheme,” FinCEN said.
The CMLN used credit cards involving over seven million charges “exceeding $6 billion between 2019 and 2024”.
By cycling dirty cash through credit card payments and resale of goods, CMLNs turned drug money into what appears to be legitimate revenue.
Red flags include
- Excessive credit card spending on electronics
- Rapid pay-downs with unknown funds
- Accounts linked to unrelated individuals or businesses.
Chinese money laundering and real estate
Banks filed more than 17,000 suspicious activity reports tied to over $53 billion in real estate transactions.
Chinese nationals residing in the China “generally are not permitted to purchase real property in the United States”, FinCEN said. Therefore, many rely on US-based CMLN brokers. These brokers transfer funds out of China and disguise the source of wealth through complex transactions.
One common tactic involves cashier’s checks. Money mules deposit bulk cash into bank accounts, purchasing multiple checks payable to third parties. They then consolidate them into larger checks, used for property purchases.
“CMLNs often pool money from several sources to complete a deal. FinCEN said this is “consistent with red flags associated with money laundering through real
estate acquisitions”.
CMLNs also send money through wire transfers. Individuals in China, often listed as “family members,” wire funds to US accounts controlled by Chinese nationals.
When banks asked for documentation, customers were “often unable to provide any” that would verify the source of the funds.
“When subjects did provide explanations, the most frequently cited reasons were to purchase real estate and tuition payments,” FinCEN said.
Investigators also traced suspicious real estate payments to companies linked to crimes such as drug trafficking, counterfeit goods, and health care fraud. These companies operated in a variety of sectors, including construction, property management, and real estate brokerage. They handled funds that supported laundering schemes.
Chinese students and laundering
A suspected $13.8 billion in funds moved by Chinese money laundering networks (CMLNs) was tied to Chinese students in the U.S, FinCEN found.
Banks, securities firms, casinos, and other institutions filed over 20,000 suspicious activity reports between 2010 and 2024.
FinCEN said Chinese students may be “vulnerable to recruitment and exploitation” due to financial difficulties. CMLNs often recruit students as money mules.
“U.S.-based Chinese students potentially “lend” their accounts to CMLNs,” FinCEN said. “[This is] typically in exchange for a fee.
“The fees likely incentivize students to open accounts at multiple depository institutions. And other forms of accounts such as credit cards.”
This gives gangs wider access to the US financial system for cash deposits and transfers.
Banks flagged several red flags, including high-end luxury purchases funded by unexplained money. FinCEN said CMLNs may also use students to try to launder cash through casinos. Companies were warned of customers gambling heavily “with no reported employment”.
FinCEN gave an example where one individual generated 87 suspicious transaction reports worth $22 million. Casinos filed nearly all of them. Early records described the person’s occupation as a student.
New York adult daycare
Finally, one of the more eye-catching schemes. FinCEN said CMLNs moved hundreds of millions through adult and senior daycare centers.
Banks filed 43 suspicious activity reports tied to roughly $766 million in transactions linked to New York-based facilities. Many of these firms were owned, or signed for, by Chinese nationals, suspected of laundering illicit cash.
The companies were effectively used as front operations. This is where gangs moved large sums under the guise of legitimate healthcare operations.
CMLNs also used these centers in other ways. “[They] potentially exploit the Medicaid-eligible elderly population by offering cash, gift cards, or other financial incentives to enroll in their services,” FinCEN said.
Banks reported suspicious patterns. These included large cash deposits, purchases of cashier’s checks payable to unknown third parties, and excessive wire transfers. One Chinese student-owner generated 34 reports totaling more than $168 million.
FinCEN said some daycare firms sent “outgoing large even-dollar payments” to companies with addresses in Hong Kong or China, it said. A U.S. bank account received the funds.
Financial institutions also reported outgoing payments from the daycare businesses to “suspected shell companies”.
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