In testimony before the U.S. House of Representatives Subcommittee on Health Care and Financial Services, Channing Mavrellis, illicit trade director of Washington think tank Global Financial Integrity, warned heavily of how Chinese money-laundering organizations (CMLOs) are benefiting drug cartels.
“The U.S., as well as the international community, need to take the threat presented by CMLOs very seriously,” Mavrellis said. “China plays an outsized role in transnational crime and money laundering mirroring its growth as an international superpower. The country’s rapid economic development has been a catalyst for advancements across a variety of industries as well as lifting 800 million people out of poverty over the last few decades."
Mavrellis noted that the downside of easing poverty-related conditions in China has been a wide range of crime.
"At the same time, however, the country has expanded its influence in a broad array of transnational crime areas including trafficking, narcotics and IP (intellectual property) theft, as well as illicit financial flows,” she said.
According to Mavrellis’ testimony, the Chinese money-laundering organizations have been working in the Western Hemisphere for several years, as the Drug Enforcement Administration have reported that CMLOs have offered services to Mexican, Colombian and Dominican criminal organizations since at least 2016.
She said Chinese money-laundering organizations are gaining favor with Mexican drug cartels because their rates are lower, representing approximately 6% commission, compared to other money-laundering organizations, which typically charge approximately 10-15% commission to launder money. Another reason why this has exploded is because CMLOs use the U.S. currency, and with the large network involving three different countries and various moving parts, it is difficult to investigate and there are loopholes in the U.S. international trade law that can be exploited to launder money.
There are a few recent examples of massive money-laundering crimes committed involving these CMLO and cartels, such as in 2021 when a CMLO network operating in Chicago and New York that laundered tens of millions of dollars in drug proceeds for Mexican cartels was dismantled, she said.
Mavrellis ended her testimony with a few recommendations to the House subcommittee: study the role of Chinese professional money-laundering networks; target the individuals, entities and countries facilitating financial crimes and money laundering; and strengthen the U.S. response to other narcotics-related money-laundering methods.
She went on to suggest that the U.S. continue to make combating corruption a high priority in its national security strategy; address inefficiencies in mutual cooperation and data-sharing through the mutual legal assistance treaty process; improve the efficacy and efficiency of Trade Transparency Units; and provide Financial Crimes Enforcement Network resources to ensure that it can take on new and emerging challenges from financial crime risks.
In a recent interview, Sebastian Rotella, senior reporter at ProPublica, said Chinese organized-crime organizations and Mexican drug cartels are working in tandem to launder the drug money made in the United States. There are also ties between the Chinese and Mexican criminal organizations working to smuggle drugs and people across the U.S.-Mexico border, as well as overlap between the cartels and Chinese businessmen, he said.
Rotella also made note of Xizhi Li, a Chinese-Mexican-American gangster with ties to both the Chinese and Mexican criminal undergrounds, who has been involved in operations of smuggling Chinese migrants into the United States.
Li was mentioned by name in Mavrellis’ testimony before the House subcommittee in connection with laundering nearly $30 million of drug proceeds for Mexican, Colombian and Guatemalan drug organizations between 2008 and 2019.
It has been suggested by some the Chinese government is aware of the money-laundering organizations, and its refusal to crack down on those organizations is allowing them to work unimpeded, NewsNation Now reported.
