American regulators have warned that sophisticated Chinese money laundering networks are helping Mexican drug cartels move staggering amounts of illicit cash through the U.S. financial system. A new advisory from the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) reveals that more than $312 billion in suspicious transactions linked to these groups were identified between 2020 and 2024. The advisory urges banks and other financial institutions to strengthen monitoring and report unusual activity without delay.
The laundering schemes exploit China’s strict capital controls, which limit citizens to converting only about $50,000 a year into foreign currency. To bypass this cap, underground networks sell U.S. dollars obtained from drug trafficking and other crimes to wealthy Chinese clients seeking to move money abroad. The cartels, in turn, receive clean pesos or other currencies, completing a cycle that benefits both sides while bypassing official channels.
According to FinCEN, more than 137,000 suspicious activity reports helped uncover the networks’ scale. These operations go far beyond drug profits, with links to human trafficking, fraud, and even shell companies in industries like senior care. By blending illicit cash with legitimate business flows, the groups create an appearance of normality that can fool inattentive banks.
The Sinaloa and Jalisco New Generation cartels are among the criminal organizations that benefit from these networks. In one recent case, investigators uncovered a $50 million scheme in which cartel profits were laundered through U.S. financial institutions with the aid of Chinese intermediaries.
FinCEN has highlighted several red flags for banks. These include large deposits from Chinese nationals whose income appears inconsistent with their professions, reluctance to reveal sources of funds, and networks advertising currency exchanges through social media or private contacts. Front businesses, such as senior care services, are also frequently used to disguise illegal flows.
The warning underscores the scale of the threat to both the financial system and public safety. The billions laundered each year directly fund drug production and distribution, including fentanyl shipments that have fueled a deadly overdose crisis in the United States. Regulators also emphasized that banks failing to respond could face significant fines, as seen in previous high-profile enforcement cases.
FinCEN’s director, Andrea Gacki, stressed the urgency of disrupting these cross-border networks. By enhancing transaction monitoring, refusing suspicious transfers, and cooperating with law enforcement, financial institutions play a critical role in choking off cartel profits. The advisory makes clear that the government expects U.S. banks to treat the threat of Chinese-backed laundering as an immediate compliance priority.
