On August 28, 2025, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued an advisory on Chinese Money Laundering Networks (“CMLNs”), emphasizing the growing role that these networks play in laundering proceeds for Mexico-based drug cartels. Accompanying the advisory, FinCEN published a financial trend analysis on SARs filed with FinCEN from 2020 to 2024 regarding suspected CMLN-related activity.
The advisory and accompanying analysis underscore the Administration’s commitment to prioritizing enforcement relating to activity involving CMLNs and cartels. In May 2025, Acting Assistant Attorney General Matt Galeotti highlighted “[c]omplex money laundering, including Chinese Money Laundering Organizations, and other organizations involved in laundering funds used in the manufacturing of illegal drugs” as one of DOJ’s top enforcement priorities.[1]
The CMLN-Cartel Nexus
The advisory provides an overview of the nexus between CMLNs and Mexico-based cartels.
The advisory notes that a “primary goal of CMLNs is to obtain large quantities of USD and other currencies to meet the demand for these currencies by Chinese citizens seeking to evade the People’s Republic of China’s (PRC’s) currency controls.”[2] The cartels generate a significant amount of illicit cash in the United States and their “need to launder their illicit USD proceeds has resulted in a mutualistic relationship wherein the Cartels sell off their illicitly obtained USD to CMLNs who, in turn, sell the USD to Chinese citizens seeking to evade the PRC’s currency control laws.”[3] FinCEN states that the “cartels have relied heavily on CMLNs in recent years to launder USD drug-trafficking proceeds through myriad methods, including both illegal and legal businesses that rely on complex schemes to disguise the source(s) of funds.”[4]
Money Laundering Typologies
FinCEN identified three typologies associated with CMLNs laundering illicit funds on behalf of the cartels: mirror transactions, use of money mules, and trade-based money laundering (TBML).[5]
Mirror Transactions. The advisory explains that CMLNs engage in “mirror transactions,” in which they transfer value by receiving and depositing money simultaneously. For example, a U.S.-based CMLN may receive USD from a cartel while Mexico-based CMLN counterparts conduct a reciprocal “mirror transaction,” in which pesos are transferred to the cartel’s Mexico-based account, with the CMLN taking a fee. FinCEN explains that the mirror transaction occurs nearly instantly and avoids many of the risks involved with cross-border bulk cash smuggling or with depositing large sums of USD in Mexico-based financial institutions, which circumvents Mexico’s USD deposit restrictions. FinCEN notes that CMLNs may also use convertible virtual currency (CVC) as an alternative means to conduct mirror transactions with the cartels.[6]
Money Mules. The advisory notes that CMLNs may rely on “money mules” to open accounts and deposit USD. These are often Chinese nationals living in the United States who “report their occupation . . . as ‘student,’ ‘housewife,’ ‘retired,’ ‘laborer,’ or other occupations that typically do not engage in large transactions.”[7] The advisory notes that CMLNs may seek to recruit insiders at financial institutions, or place their members in jobs at financial institutions, to assist in these schemes.[8]
The advisory provides a number of red flags associated with this illicit activity, including customers who present Chinese passports during the onboarding process and who regularly receive funds that are not commensurate with their reported occupation or income and who may be unwilling to provide information regarding the source of such funds. For example, one of the red flags is as follows:
- A customer, especially a Chinese national, creates an account at a financial institution and reports their occupation as a student during the onboarding process. This customer then regularly deposits cash into their account or receives wire transfers notated as “tuition” or “living expenses” that are not commensurate with the reported information. After receiving the funds, the customer may subsequently initiate wire transfers or peer-to-peer (“P2P”) transactions to unknown individuals who are unrelated to the purpose of the wire transfers or may make credit or debit card payments.[9]
Trade-Based Money Laundering. FinCEN notes that CMLNs may use TBML schemes to launder funds for the cartels. TBML schemes involve the purchase of U.S. electronics and other luxury goods by money mules and other recruits using drug proceeds or with credit cards that are subsequently paid off by CMLNs or by a complicit business owner. Typically, such purchase activity by the “money mule” or “recruit” is not commensurate with their income. FinCEN notes that once the goods are purchased, CMLNs use front companies or complicit businesses to resell or export the goods. TBML schemes often rely on daigou buyers, an arrangement popular on Chinese social media channels where buyers based outside of China purchase and import goods, often at a lower price, on behalf of Chinese residents.[10]
The advisory provides a number of red flags associated with this illicit activity, including where a business owned by a Chinese national regularly receives deposits from online marketplaces, but rarely engages in transactions that indicate the purchase of goods to maintain inventory. Additional red flags include where a customer, especially a Chinese national, regularly uses a credit card to purchase large volumes of electronics or other luxury goods, or a business that sells electronics or other luxury goods has income that is not commensurate with the size and scale of the business. Another red flag provided by FinCEN is:
- A customer, especially a Chinese national, regularly receives P2P or wire transfers from unknown individuals and subsequently uses those funds to make a substantial credit card payment. If questioned about the source of the funds, the customer may state that the transfers are from U.S.-based family members of Chinese citizens who are sending the customer funds to purchase goods.[11]
United States v. Martinez-Reyes
FinCEN refers to the ongoing United States v. Martinez-Reyes prosecution as an illustration of recent enforcement efforts.[12] On April 4, 2024, a Central District of California grand jury returned a superseding indictment against Edgar Joel Martinez Reyes and co-conspirators in the Sinaloa Cartel and CMLNs. As alleged in the indictment, the Sinaloa Cartel and the CMLNs conspired to launder over $50 million in proceeds of the cartel’s narcotics sales and other illicit activity. The Sinaloa Cartel members struck a deal pursuant to which they delivered their drug proceeds to the CMLN to be laundered for a fee. The CMLN laundered the money by delivering USD to their Chinese customers, purchasing estate and luxury items for export to China, purchasing cryptocurrency, or depositing it in banks in structuring transactions. The indictment reports “an explosion of illegal money exchange businesses run primarily by Chinese nationals in the United States, that are able to accept enormous amounts of United States currency from their [cartel] customers and complete the money laundering cycle for a small fee (0.5% to 2% of the amount being transferred), in contrast to traditional money laundering methods for which the [money laundering organization] typically charged much higher rates of 5% to 10% or more.”[13] The case remains ongoing.
Trends in CMLN Activity
In the accompanying Financial Trend Analysis, FinCEN identified eight key trends in CMLN activity based on over 137,000 BSA reports (likely all SARs) filed between 2020 and 2024.[14]
In summary, the analysis shows that CMLNs rely on networks of Chinese nationals based in the United States, and their money laundering activities are frequently tied to other fraudulent schemes.
- Banks filed the majority of CMLN-related SARs. Banks filed the lion’s share—85%—of SARs related to CMLNs. Money services businesses filed the second highest number, at 9%.
- CMLNs rely on U.S.-based Chinese nationals to deposit cash into the U.S. financial system. The most common type of SAR involved U.S.-based Chinese nationals depositing large amounts of cash that were disproportionate to the depositors’ income into U.S. financial institutions. FinCEN identified $33 billion of transactions of this nature. Many of these deposits were immediately transferred to another account, or used to purchase a cashier’s check. In other words, the money did not remain in the depositor’s account. FinCEN reports that these deposits are often tied to Chinese citizens’ efforts to expatriate RMB.
- CMLNs’ access to USD potentially facilitates trade-based money laundering (TBML) schemes. FinCEN reports that CMLNs use money mules to place large amounts of cash into the U.S. financial system to further TBML schemes. Indicators of TBML activity included unusual deposits into the same customer’s accounts from unrelated individuals and businesses that did not appear to be related to the customer’s business or occupation, the purchase of high-value luxury goods, sometimes via layering mechanisms, and use of deposits to pay down credit cards in an excessive and repetitive manner.
- CMLNs potentially work with U.S.-based Daigou buyers to launder illicit proceeds. The term “daigou” refers to an informal arrangement, popular on Chinese social media platforms, where buyers based abroad purchase goods on behalf of China residents. Daigou buyers are compensated and can also get credit card points. These networks require large amounts of U.S. dollars to facilitate purchases, which brings them into contact with the CMLNs. FinCEN reports that daigou buyers use credit cards to purchase luxury items and obtain cash from CMLNs to pay down account balances. Signs of illicit daigou activity include high volume purchases of items that exceed personal use and occasional admission that the buyer is buying on behalf of friends or family in China.
- CMLNs are linked to human trafficking and human smuggling. FinCEN recorded $4.2 billion of suspicious activity linked to human trafficking or human smuggling. Red flags include transfers to businesses frequently used by human traffickers, such as massage businesses, spas, escort services, and restaurants or bars.
- CMLNs are linked to New York adult daycare centers, healthcare fraud, and illicit gaming activity. FinCEN flagged $766 million in SARs associated with 83 New York adult daycare centers owned by Chinese nationals. Filing institutions reported these transactions due to suspicions that they were related to Medicaid, Medicare, or insurance fraud. FinCEN notes that CMLNs moved fraudulent proceeds through accounts held by individuals, unrelated businesses, and overseas companies to facilitate other criminal activity and TBML schemes. Relatedly, FinCEN identified 108 reports associated with healthcare fraud, elder abuse, and suspicious gaming activities.
- CMLNs potentially facilitate real estate purchases funded by proceeds from financial crimes. FinCEN identified $53.7 billion in real estate transactions, accounting for 13% of the SARs. The Chinese government prohibits its citizens from owning property in the United States, leading Chinese citizens to resort to CMLNs to transfer funds. Many SARs referred to incoming wire transfers from individuals in the PRC, sometimes but not always referred to as family members.
- CMLNs may use Chinese students. Fourteen percent of CMLN-related reports, totaling $13.8 billion in suspicious activity, referenced individuals purporting to be Chinese students. FinCEN believes that Chinese students may be vulnerable to recruitment as money mules. They potentially open accounts at multiple banks, and sign up for multiple credit cards, for use by CMLNs. FinCEN notes that 12 financial institutions filed 34 BSA reports on an individual totaling $81 million in suspicious activity between 2015 and 2024. The individual was listed as a student in 15 of the reports, with four California colleges listed as the place of study. The individual was engaged in potential money-mule activity, incoming high-dollar wire transfers from China, high-end luxury purchases with unsourced funds, and financial transactions consistent with mass marketing scam activity.[15]
* * *
[1] Memorandum from Matthew R. Galeotti to the Department of Justice Criminal Division at *4, (May 12, 2025), available at https://www.justice.gov/criminal/media/1400046/dl?inline, (emphasis added).
[2] FinCEN, FinCEN Advisory on the Use of Chinese Money Laundering Networks by Mexico-Based Transnational Criminal Organizations to Launder Illicit Proceeds at *3, (August 28, 2025), https://www.fincen.gov/sites/default/files/advisory/2025-08-28/FinCEN-Advisory-CMLN-508.pdf. The advisory explains that the “PRC’s currency control laws restrict the amount of Chinese renminbi (RMB) that Chinese citizens are allowed to convert into other currencies each year,” which has “increased Chinese citizens’ demand for access to USD in a way that circumvents the PRC’s control over the funds.”
[3] Id.
[4] FinCEN, Chinese Money Laundering Networks: 2020–2024 Threat Pattern & Trend Information at *4, (August 2025), https://www.fincen.gov/sites/default/files/advisory/2025-08-28/FinCEN-Advisory-CMLN-508.pdf. In addition to laundering funds for cartels, FinCEN noted that CMLNs may launder funds from other illegal activities, including healthcare fraud, elder abuse, and suspicious gaming activity. BSA reports have identified CMLNs utilizing adult and senior day care centers and real estate purchases as part of their complex money laundering schemes.
[5] FinCEN, FinCEN Advisory on the Use of Chinese Money Laundering Networks by Mexico-Based Transnational Criminal Organizations to Launder Illicit Proceeds, (August 28, 2025), https://www.fincen.gov/sites/default/files/advisory/2025-08-28/FinCEN-Advisory-CMLN-508.pdf.
[6] Id. at *5.
[7] Id. at *6.
[8] Id.
[9] Id. at *9.
[10] Id. at *6–7.
[11] Id. at *10.
[12] Id. at *7–8.
[13] Superseding Indictment at 4, United States v. Martinez-Reyes, No. 2:23-cr-524(A)-DMG (C.D. Cal.).
[14] FinCEN, Chinese Money Laundering Networks: 2020–2024 Threat Pattern & Trend Information, (August 2025), https://www.fincen.gov/sites/default/files/advisory/2025-08-28/FinCEN-Advisory-CMLN-508.pdf.
[15] Id. at *19–20.
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