It is estimated that 2% to 5% of global Gross Domestic Product (GDP) is laundered money, and a veteran U.S. intelligence and law enforcement officer, who has studied transnational crime, said China is responsible for half of that, or $2 trillion.
John Cassara retired after a 26-year career in the federal government intelligence and law enforcement communities. Since his retirement from government, Cassara has consulted for governments, lectured and testified before congressional committees on matters dealing with money laundering, threat finance, and transnational crime.
Cassara also has authored a pair of books on the subject, including his newest work, “China — Specified Unlawful Activities: CCP Inc., Transnational Crime and Money Laundering.”
His last position was as a special agent detailee to the Treasury Department's Office of Terrorism Finance and Financial Intelligence (TFI). Cassara’s parent Treasury agency was the Financial Crimes Enforcement Network (FinCEN), the U.S. Financial Intelligence Unit (FIU). He worked at FinCEN from 1996-2002.
From 2002-2004, Cassara was detailed to the U.S. State Department Bureau of International Narcotics and Law Enforcement Affairs (INL) anti-money laundering section to help coordinate U.S. interagency international anti-terrorist finance training and technical assistance efforts.
“I had been looking at and investigating and researching money laundering for well over 30 years,” he told Federal Newswire. “About 10 years or so ago, I started to get very nervous with what I saw in my international travels, with China’s presence, growing presence, particularly in the developing world, and the kind of things that I was seeing and hearing and reading about China and its growing role in transnational crime.
"There were a couple of studies that came out about three or four years ago that talked about transnational crime. I’m looking at various categories," he added. “And I realized that the one common denominator, whether it was, counterfeiting or wildlife trafficking or human trafficking or whatever it is, was China.'”
He also authored a piece on the “quiet ascendency of Chinese money launderers” that was published by American Thinker on March 4.
“With ‘swaps,’ Chinese brokers often working with Chinese organized crime groups and the cartels identify Chinese/American cash intensive businesses that are willing to cooperate,” Cassara wrote.
“How do the swaps work? The Chinese/American businessman receives the drug cash from the Chinese broker working with the cartels,” he wrote. “The business later ‘places’ the proceeds of crime into its revenue flow and represents the drug cash as legitimate proceeds from the business. Or, the Chinese use the cash to assist other Chinese that want to circumvent Chinese capital flight restrictions and, for example, purchase U.S. property, housing, or other high-ticket goods."
Cassara further explained the connection.
“Meanwhile, these complicit businesses are asked to transfer a designated amount of money through Chinese phone apps to accounts based in China," he wrote. "Using a currency converter app on a smartphone, the participants agree on the exchange rate between the U.S. dollar and the Chinese yuan.”
Once the money is offshore in China, the value can be further rerouted to Mexico or elsewhere per the instructions of the cartels.
Both the U.S. Department of the Treasury and Europol, the European Union’s law enforcement agency, have issued alerts regarding the growing network of Chinese criminal organizations engaged in laundering proceeds from drug trafficking. In November 2019, Europol warned that these groups pose a “growing threat to Europe,” while in February, the U.S. Treasury added Chinese professional money laundering networks to its list of “key threats” and vulnerabilities within the American financial system.
For years, the Mexican cartels that supply the U.S. market with cocaine, heroin and fentanyl smuggled truckloads of bulk cash to Mexico, where they used banks and exchange houses to move the money into the financial system. And they also hired middlemen, often Colombian or Lebanese specialists who charged as much as 18 cents on the dollar, to launder their billions. Enter Chinese operatives, who developed methods of laundering cartel money faster, and exponentially cheaper.
In 2007, $205 million in cash was confiscated by Mexico City police from a residence belonging to Chinese entrepreneur Zhenli Ye Gong. More recently, numerous Chinese citizens have been arrested by U.S. law enforcement for their participation in elaborate money-laundering schemes.
Mexican criminal organizations, specifically the Sinaloa Cartel and the Cartel Jalisco Nueva Generación (CNJG), obtain the majority of their precursor chemicals from China. These chemicals are subsequently utilized to synthesize fentanyl and methamphetamine, which are then smuggled into the United States and other countries.
As Matthew Donahue, the deputy chief of foreign operations for the U.S. Drug Enforcement Administration (DEA), pointed out in March 2021, Chinese traffickers have mostly ceased manufacturing fentanyl analogs and instead concentrate on producing precursors, with an “unlimited and never-ending” supply of these chemicals flowing from China to Mexico. Mexican criminal organizations also procure such precursors, but to a lesser extent, from India.
A report published in March 2022, by the UN Office on Drugs and Crime, stated drug cartels in Mexico are resorting more and more to online platforms, e-commerce, and bitcoin for drug sales and money laundering. According to the International Narcotics Control Board, the Jalisco New Generation Cartel and the Sinaloa Cartel have increased their utilization of bitcoin for small online transactions as a means to evade money-laundering regulations.
Cassara said it’s impossible to determine the scope of the money laundering activity between China and Mexican cartels.
Is the Chinese government directly involved?
“It’s a good question. It kind of depends on the way to specify unlawful activity,” Cassara said. “If you look at certain specified unlawful activities, for example, intellectual property rights violations, obviously the Chinese government is behind it because the Chinese spy agencies are behind it. Weapons proliferation. The Chinese government is behind it. Some forms of human trafficking, forced labor camps, that kind of stuff. The government is behind it.
“When you look at narcotics trafficking, a jury is out on that," he added. "But I think what’s telling time is that we have to remember that China is a command state. CCP is a command state. It's authoritarian. So they can do what they want to do. If they wanted to, they can turn off the spigot of drugs going into Mexico or precursors that are going into Mexico. They choose not to do it."
Cassara said the evolving markets of cryptocurrency and digital currency are becoming part of this massive scheme.
“By far the greater threat when it comes to money laundering in general and Chinese involvement in particular are kind of the old-fashioned ways of moving money through bulk cash and through trading through banks,” he said. “But yes, the DEA, there have been some cases where Chinese cryptocurrency brokers are involved as well as Chinese underground banks.”
American and international law enforcement agencies face major challenges in trying to control these crimes, Cassara said.
Cassara said China is not cooperating with law enforcement agencies across the globe.
“They do very little in the international arena when it comes to exchanging what we call financial intelligence," he said. "The bottom line is, we can’t look to the Chinese authorities for help with this problem.”
China has said it’s up to the U.S. and Mexico to solve these problems, and it doesn’t see a role for itself in dealing with them, even as it profits from them and helps them grow and fester.
Cassara is scheduled to testify before the House Financial Services subcommittee on national security, illicit finance and international financial institutions on Thursday.
He has offered steps that he thinks need to be taken to reduce money laundering and the crimes it fuels, but notes there is no silver bullet, no magical way to end this pernicious problem.
“There’s not just one thing that the U.S. government could do,” Cassara said. “There’s a number of things that we should be doing that I will talk about in the hearing and I talk about in the book.”
He said cracking down on trade-based money-laundering, the “largest money laundering methodology in the world right now,” must be a focus.
