Treasury warns banks about China-Mexico money-laundering risks

The U.S. Treasury has issued a fresh warning for banks to be on the lookout for Mexican drug cartels that use Chinese money-laundering networks to hide their profits.

The Treasury’s Financial Crimes Enforcement Network identified about $312 billion in transactions potentially tied to Mexican narcotics rackets and Chinese money-laundering entities during the five years from Jan. 1, 2020, through Dec. 31, 2024, according to a statement.

“Chinese money laundering networks are global and pervasive, and they must be dismantled,” FinCen Director Andrea Gacki said in a statement. The agency’s advisory to banks is meant to “bankrupt transnational criminal organizations and their enablers,” she said.

Of those transactions, the vast majority – $246 billion – were filed by banks. Money service businesses, which facilitate money orders and other types of monetary transfers, accounted for $42 billion of the total, while securities and futures transactions accounted for $23 billion.

The Chinese money laundering networks, which arose in part as a consequence of Mexico’s and China’s limits on the amounts and types of transactions their citizens can conduct using U.S. dollars, “enable cartels to poison Americans with fentanyl, conduct human trafficking, and wreak havoc among communities,” said John Hurley, the Treasury undersecretary for Terrorism and Financial Intelligence.

FinCen has given banks a list of “red flags” to look out for, including suspicious identification documents, instances of unusual transactions or unexplained wealth. Banks and other financial institutions are required to look out for and report such unusual activity and could be subject to penalties if they fail to do so under their obligations in the Bank Secrecy Act.