The U.S. Department of the Treasury provided a comprehensive list on Thursday (August 28) of user behaviors that banks may view as potentially involving money laundering. Holding a Chinese passport is a particular focus for the Treasury Department in regards to suspected money laundering activities.
The Treasury Department has issued a warning that Chinese money laundering networks pose a significant threat to the U.S. financial system, urging banks to enhance vigilance. According to data from the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), suspicious transactions attributed to Chinese Money Laundering Networks (CMLN) through U.S. banks and other financial institutions amounted to approximately $312 billion between January 1, 2020, and December 31, 2024.
These underground networks also assist Mexican drug trafficking groups in money laundering, while being involved in illegal activities such as fraud, human trafficking, and smuggling.
The Treasury Department points out that individuals holding People’s Republic of China (PRC, Communist China) passports play significant roles in these money laundering networks, potentially aiding global money laundering activities intentionally or unintentionally.
Therefore, the Treasury Department released operational guidelines for banks on Thursday, listing multiple “red flag” indicators to help identify, prevent, and report suspicious activities related to Chinese money laundering networks.
Banks and other financial institutions are mandated to be alert and report such irregular activities. Failure to comply with the regulations set forth in the Bank Secrecy Act may result in penalties.
FinCEN emphasizes that as a single red flag is not sufficient to determine the legality or suspiciousness of an activity, financial institutions should consider a client’s financial history, whether transactions conform to regular business practices, and if clients exhibit multiple red flags when evaluating whether behavior or transactions are suspicious or connected to Chinese money laundering networks.
Customers (especially those using Chinese passports as identification) frequently receiving funds that do not match their reported profession or income, and funds whose sources cannot be classified as wages or other legitimate income (i.e., unexplained wealth).
Customers providing a Chinese passport and visa for account opening, but having identical photos on both documents despite a significant time gap between the issuance dates.
Customers (especially Chinese citizens) declaring themselves as students during account opening, subsequently frequently depositing cash or receiving wire transfers labeled as “tuition fees” or “living expenses” which do not align with their declared information. Following receipt of funds, customers may initiate wire transfers or P2P transactions to unknown individuals unrelated to the wire transfer’s purpose, or engage in credit card or debit card payments.
Customers (particularly Chinese citizens) declaring occupations as students, retirees, homemakers, or other low-income professions at account opening, yet possessing unexplainable wealth.
Customers (especially Chinese citizens with unexplained wealth) initiating wire transfers related to real estate purchases or purchasing bank checks from real estate companies as payees. Customers may be accompanied by real estate agents when purchasing bank checks.
Customers (especially Chinese citizens) regularly depositing large amounts of cash or bank checks, or receiving multiple wire transfers, automated clearing house (ACH) deposits, or P2P transfers with no apparent commercial or lawful purpose. Subsequently, customers may use these funds to purchase bank checks or transfer funds to other individuals via P2P and wire transfers, particularly to high-risk areas.
Customers’ accounts (especially Chinese citizens) receiving significant transfers or deposits, with large withdrawals or transfers, unrelated to routine wages, living expenses, or expected customer activities.
Customers (especially Chinese citizens) holding large amounts of cash for bank check usage, then depositing it into another banking institution.
Customers (especially Chinese citizens) unwilling to provide information on the source of funds deposited or transferred to the account, being evasive when questioned about transaction purposes, or claiming transactions are loan repayments.
Clients being a U.S.-based custodial company receiving funds from an unrelated foreign shell company or an entity engaged in different activities, used to purchase real estate in the U.S.
Enterprises owned by Chinese citizens regularly receiving deposits from online markets but rarely or never engaging in purchases of inventory.
Enterprises owned by Chinese citizens regularly receiving wire transfers indicating export of goods to countries such as Mexico, China, Hong Kong, the United Arab Emirates, but seldom or never conducting inventory procurement transactions.
U.S. small electronic product or real estate enterprises receiving wire transfers from Mexico, China, Hong Kong, the United Arab Emirates, with no apparent business connections to these countries.
Customers (especially Chinese citizens) frequently receiving P2P transfers or wire transfers from unknown individuals, subsequently making large credit card payments with these funds. When asked about the source of funds, customers may claim they are from Chinese family members residing in the U.S. for purchasing goods.
Customers (especially Chinese citizens) frequently purchasing large quantities of electronic products or other luxury goods using credit cards.
Enterprises selling electronic products or other luxury goods having income disproportionate to their business size.
Enterprises selling electronic products or other luxury goods making payments to multiple seemingly unrelated individuals’ credit cards.
Hong Kong-registered trading companies displaying characteristics of shell companies, making wire transfers to Chinese citizens residing in the U.S., real estate custodians, or title insurance companies, and other international destinations, without apparent business or economic purposes.