“China’s (CCP) money laundering organization has become the dominant player in the majority of global money laundering activities in less than a decade, from obscurity to today,” said Ricardo Mayoral, Acting Assistant Director for Transnational Organized Crime at the Department of Homeland Security Investigations.
Mayoral, speaking at a hearing held by the Senate International Drug Control Core Group on Tuesday, April 30, stated that the CCP’s money laundering organization has become the top choice for Mexican drug trafficking groups.
He explained that the CCP’s money laundering organization serves as a foreign currency exchange center, helping transnational criminal organizations convert dollars obtained through criminal activities into foreign currencies. They often utilize encrypted applications that law enforcement agencies in the United States cannot penetrate to conduct transactions, allowing drug trafficking groups and the CCP’s money laundering organization to swiftly and discreetly transfer large amounts of illicit funds.
Mayoral noted that the CCP’s money laundering methods are diverse, including underground banks, the use of “money mules,” and collusion with bank insiders.
He mentioned that the money laundering organization channels the funds needing to be remitted overseas through a local bank account under their control via underground banking systems. Subsequently, they arrange for equivalent payments or mirror transfers to bank accounts selected by the remitter. This mirror transfer laundering is faster and more cost-effective than other professional money laundering organizations.
To circumvent reporting requirements under the U.S. Bank Secrecy Act—transactions exceeding $10,000 must be reported to financial institutions—criminals employ structuring, dividing large financial transactions into smaller transactions below the ten thousand dollar threshold to evade scrutiny by regulatory agencies or law enforcement.
Additionally, the money laundering organization recruits unsuspecting overseas Chinese individuals as “money mules” in various locations.
Mayoral mentioned that some Chinese individuals employed in blue-collar jobs such as manual labor or chefs are recruited as money mules, using their Chinese passports and false identities to open bank accounts.
He stated that the CCP’s money laundering organization recruits personnel from the globally dispersed Chinese community and rapidly adapts their operational methods exploiting regulatory loopholes.
The official revealed instances of bank insiders collaborating with money laundering organizations. The CCP’s money laundering organization bribes staff at different branches of U.S. banks, ensuring that they turn a blind eye to the use of fake Chinese passports in the account opening process, and even assist in verifying if the accounts they opened are being monitored by U.S. law enforcement.
Moreover, the money laundering organization infiltrates its own personnel into branches of U.S. banks, allowing them not only to monitor problematic accounts but also change the addresses and phone numbers on these accounts post-account opening. In case the bank contacts the customers, they arrange for their own operatives to handle the phone calls.
Brian Nelson, Deputy Assistant Secretary of the Treasury for Terrorist Financing and Financial Crimes, stated in his testimony that the CCP’s money laundering organization exploits Chinese demand for dollars and vast illicit income supplies from transnational criminal groups to access dollars, enabling them to transfer value across borders without the need for physical cash or formal financial systems, posing a challenge to the detection and disruption of their activities by the U.S.
China restricts Chinese citizens from transferring funds abroad exceeding $50,000 annually, leading some Chinese individuals seeking to evade currency restrictions to increasingly rely on money laundering organization services to obtain dollars.
At the hearing, Nelson expressed that the CCP’s money laundering organization has emerged as one of the most significant money laundering threats facing the U.S. financial system, charging lower fees, providing loss guarantees, and simplifying the money laundering process.
Senator Sheldon Whitehouse, Chairman of the Senate International Drug Control Core Group and the Budget Committee, highlighted at the hearing that the response from the U.S. and its international partners to this threat has been relatively slow.
The senator proposed a bipartisan resolution aimed at establishing a Cross-border Financial Crime Center under the Department of Homeland Security to coordinate federal financial crime investigations and border-related information in the U.S. He emphasized that this center would enhance America’s capability to combat the network of the CCP’s money laundering organization.