John Cassara is the author of China–Specified Unlawful Activities: CCP Inc., Transnational Crime and Money Laundering. He serves on the Board of the Global Financial Integrity and International Coalition Against Illicit Economies.
Federal Newswire
How did the nexus between China and money laundering get onto your radar?
John Cassara
I started getting involved with China…[while working in] anti-money laundering for well over thirty years. [Though] it's only been about the last 10 or so that China has come up on my radar screen.
I first saw that when I was going overseas. I was doing a lot of training, delivering some assistance, and mentoring to law enforcement, Intel, [and] Customs overseas in conjunction with our government. I saw the growing Chinese presence, which alarmed me. Then I started hearing, reading about, and actually witnessing some things that really took me aback.
I wrote a book a couple of years ago about money laundering in general [and] I had a chapter in that book about what I call “China, today's biggest money laundering threat.” That was the genesis for my new book China - Specified Unlawful Activities: CCP Inc., Transnational Crime and Money Laundering.
Federal Newswire
What's the thrust of the book?
John Cassara
Communist China is an ideological, military, economic, commercial, technological, intelligence, and diplomatic rival of the United States and the West.
But the People's Republic of China also has a growing role in transnational crime and money laundering. Most people aren't aware of that so I looked at it from a law enforcement perspective, because that's my primary background. I think it's been the first time that's happened. I think that's where they're most vulnerable and we can pick up on that later.
The book [references] specified unlawful activities. It's kind of a legal term that means predicate offenses or those crimes that you can use to charge money laundering. I looked at what I considered perhaps the top twelve transnational crimes in the world. In almost every one, with one possible exception, China leads the world. These are counterfeiting goods, narcotics, intellectual property rights violations, human trafficking, forced labor, wildlife trafficking, illegal logging, illegal fishing, illicit tobacco trade, fraud, arms trafficking, WMD proliferation, organ harvesting, and corruption. Those are my top 12.
The next thing I did is, I totaled up China's involvement in all of these–I call it CCP Inc.-- Chinese actors, and their involvement in all this from my anti-money laundering perspective. I worked to try to get a dollar value to attach to this criminal activity. The number, citing experts, was over two trillion dollars a year.
Now I think this is important for the readers to understand. That number has some significance because from an anti-money laundering perspective we honestly don't know how much dirty money is out there. But the estimate we normally fall back on is what the international monetary fund said a number of years ago. It's about 2-5% of world GDP.
So in very round numbers in 2023 that's about four trillion dollars a year. So what I'm saying is, if you wanted to look at it that way, CCP Inc. is responsible for almost half or perhaps more than half of the money laundering as measured by specified unlawful activities.
The next thing I did was look at what I call Chinese-centric money laundering methodologies. Things like flying money or chinese underground banking systems, capital flight, gaming, real estate, offshores, this type of thing.
Then I also talked about what I call Chinese-centric enablers, like organized crime, influence operations, espionage… Plus I talk a great deal about corruption and China’s growing overseas presence under the Belt & Road Initiative.
When you add it all together…the totality of what they're doing is absolutely overwhelming. It's just shocking. I've been around the block. I'm not a naive guy, but what I found absolutely floored me.
Federal Newswire
What led to this rise in illicit activities? Does it coincide with the rise of Xi Jinping as China’s leader or is there something else?
John Cassara
Well I'm glad you made that point because I agree with you. It's about a simultaneous rise with Xi’s ascendancy and the CCP's new ascendancy. It would be one thing if China kept their criminal activity within the country, but when they export it, [it’s something else].
I think that their vehicle to export it was really accelerated with Xi's Belt and Road Initiative, because right now that…[includes] presence in about 150 countries…They are taking their way of business with them, which is fine up to a point. But they're also taking some of their criminality with them, including their corrupt ways of doing business, lack of transparency, organized crime, and unique money laundering methodologies. There's also kind of a new found assertiveness by China…militarily, diplomatically, economically, and commercially. So the whole thing has to be looked at as a whole.
Federal Newswire
What's different about China, Inc. when it comes to the modalities and entities they're using for this?
John Cassara
I think one of the biggest things to understand about Chinese-centric money laundering is that it's varied, and that's what professional money launderers do. They don't just do one thing. It's varied, but one of the things, just to give an example…is known as trade-based money laundering and value transfer.
I wrote a book on trade-based money laundering. I called it the next frontier in international money laundering enforcement. I think that book came out about 2016. This is something that has long concerned me, even before China–but China is the largest trading nation in the world.
Unfortunately, we've never systematically examined the magnitude of trade-based money laundering, although academics have kind of looked at [it] a little bit. But our government has never done it. Neither has the IMF, World Bank, or think tanks.
But if you look at the percentages of invoice fraud primarily through over- and under-invoicing to transfer value it could literally mean hundreds upon hundreds of billions of dollars a year by China alone.
Trade fraud is a specified unlawful activity or a predicate offense [that enables a] charge of money laundering. Trade-based value transfer in all its varied forms can be a money laundering methodology, and it takes place in other forms of Chinese-centric money laundering methodologies like flying money, or “Fei-Chien.” Probably most in your audience have heard of hawala, the underground Middle-Eastern/South-Asian financial system that came to prominence after 9/11.
Flying money is basically the same system. Although it's been around since the Tang Dynasty, in the year 900, [but] back then they didn't have currency like we have. They used trade to settle accounts, to balance the books. They do that today as well.
There are many other methodologies. Some are very sophisticated.
For example, the Chinese use telephone mobile payment apps to launder drug money here in the United States and around the world, which completely stymies our criminal investigators. This is something else that we've just kind of picked up on, going back about five years, we saw it for the first time.
I don't want to speak for DEA, my former colleagues, but I think they will tell you that this is probably one of the most challenging forms of money laundering in the Western hemisphere.
The use of mobile phone apps, “swaps,” as they call them/ They pick up drug money and launder it for the cartels. The Chinese brokers then–through their phone apps–send a like amount of money to their accounts in China for a percentage. This completely bypasses our financial transparency reporting requirements, which are our primary anti-money laundering counter-measures.
Federal Newswire
Can you explain the relationship between the Chinese Communist Party and the Mexican cartels?
John Cassara
Once again, you've seen the growth over the last so many years of Chinese criminal groups, suppliers, and Chinese consumers in mainland China. Other countries, for that matter, increasingly play a very significant role in Mexican drug trafficking. Something that's overlooked when talking about Mexico and organized crime is wildlife trafficking as well.
China, as many people know, is probably the principal source of precursor chemicals for the fentanyl trade for Mexican criminal groups. Principally the Sinaloa and Jalisco cartels. Mexican-China wildlife trade is also becoming a mechanism to transfer value in the illicit economies, and once again bypass money laundering controls in China and Mexico.
[It] bypasses banks because they use wildlife to pay for drug precursors. It's basically almost a barter system, completely off the books. No financial intelligence is generated whatsoever, and they have huge markups for wildlife products. [This] makes them an ideal means to launder money and transfer value.
It is an example of how this stuff really impacts what's going on in the illicit economies around the world, but specifically with Mexico. They're going after everything. From sea cucumbers, jellyfish, sharks, totoaba, and vaquita that get caught up in these nets.
When they're going after everything else, they're fishing this stuff to extinction. The Chinese diaspora say, for example, in Mexico they're brokering the source of these products. They're working hand in glove with the cartels, and unfortunately I see some of the telltale signs of their presence here in the United States as well. It’s very alarming.
Federal Newswire
What kind of entities are engaged in these activities? Are they sole operators or more organized criminal organizations that have attached themselves into legitimate businesses and may be flying under the cover of larger enterprises, perhaps even state-owned ones?
John Cassara
I think a little bit of both. Definitely you have Chinese organized crime [like] the Triads, and to a lesser extent the Tongs. But from a law enforcement perspective, we know that we're doing a very good job combating that.
What we know is more challenging are the ones that are under the radar. For example, students. That’s a big problem.
I've read reports coming out of the UK about Chinese students and how they are used as mules, smurfs, or couriers. Sometimes they're not even aware of what they're doing. [For example], you may try to help Chinese immigrants open an account and deposit money. Or you've got cash intensive Chinese businesses–it could be restaurants, it could be anything that's cash intensive–and they're the ones that are often approached by Chinese brokers working with the Mexican cartels.
They're using all kinds of people, all kinds of groups. It's very effective and it's very challenging for law enforcement.
Federal Newswire
How do we combat this? What coalitions need to be built up, what tools do we need to use or even build, and what policies need to be put in place?
John Cassara
I write about that at the end of my book, I have a section called “steps forward.” I have a number of recommendations.
I was also honored about a month or so ago to testify before the House Financial Services Committee. They were doing a hearing on fentanyl [and] they came up with a number of recommendations. I'll give you two.
One of them is, we need a whole-of-government approach, which calls for a strategy to go after Chinese transnational crime and money laundering. We need to get all of the government involved, meaning the appropriate government agencies; the FBI, DEA, DHS, ICE,and regulatory agencies like Treasury, State, etc… They all need to come in and say “okay we agree, we have a problem here, what can we as a government do to combat Chinese transnational crime and money laundering?” Because it affects each and every one of us as Americans.
As part of this, I would like to see another recommendation from back in the day when anti-money laundering was just taking off.
Back in the 80's and 90's we came up with a number of task forces. We had task forces for example, focusing on Italian-American organized crime. I would like to see the same type of thing reconstituted to go after China and Chinese transnational organized crime in this country; and then use our tremendous law enforcement and intelligence networks liaison overseas to help our counterparts, friends, and allies go after Chinese transnational crime and money laundering as it affects their countries as well.
One thing I would emphasize,… when the FBI is looking at China their primary focus is counter-espionage and intellectual property rights violations. Both are extremely important, but…we cannot focus on one or two crimes.
If we focus just on fentanyl we're missing the big picture. We have to attack the totality of everything. For example, those 12 specified unlawful activities are all deserving of our time and efforts, as well as the Chinese-centric money laundering methodologies. If we give all our resources to the FBI, they're going to just place more emphasis on counter-espionage and IP theft. They're not going to really focus on everything else. That's a big mistake.
Federal Newswire
Would you say this is a national security threat at the leadership level?
John Cassara
Absolutely.
Federal Newswire
Do you think the priority needs to be defining the scope of what China may be responsible for? We all want to stop fentanyl, human trafficking, and other abhorrent behaviors of the organized crime world, but if you don’t take the money out of this then it can’t be stopped, can it?
John Cassara
I endorse everything you said. Outside of crimes of passion, or murder committed in a jealous rage or something like that, criminal organizations and even nation-states commit crime for money. Money is the motivating factor. One of the seven deadly sins comes down to money. How often have we heard that expression before?
We've talked a great deal over the 30 years I've been in anti-money laundering about going after the money, but we've never really done it successfully. We have spent an inordinate amount of time going after the product. For example, drugs, stolen cars, weapons, or the heads of the cartels and this type of stuff.
What we're not doing successfully is going after the money. There's a lot of reasons for that.
The short answer is, and I've been in the Federal bureaucracy so I can say this, it's easier to go after the product and the people over the money. It's easier. You're going to get rewarded bureaucratically, faster and easier if you have a press conference with mounds of fentanyl on the table as opposed to taking two to three years to try to make a long-term complex money laundering investigation.
But that's the direction we need to go. I think we're starting to head in that direction now.
Federal Newswire
We know there are national and international criminal elements, and corruption that occurs in big organizations and big governments. Have you been able to arrive at an assessment of how high up does this go?
John Cassara
It's something that I wrestled with. I think that for certain specified unlawful activities like intellectual property rights theft the CCP at the highest levels is behind that. Same thing with proliferation of WMD’s…This can only be done at the highest levels of the CCP.
Others to look at include illicit tobacco or counterfeiting of goods–sources of huge criminality in China. But once again, they are exporting this. China obviously is the largest counterfeiter of goods in the world, they are also the largest producer of illicit tobacco in various forms in the world.
So you'd say “well you know China does not really crack down on it.” Well why don't they crack [down] on it? Because it provides employment, because it's a growing industry, it fuels their economic renaissance. It's not in their interest to crack down on it. Same thing with fentanyl. They could crack down on it if they wanted to, but they choose not to.
We could go into those reasons as well, same thing with advertising for their illicit products. It's online. They use social media. They could crack down on it if they want to. They're very good at cracking down on websites and social media that they find objectionable, but they choose not to.
Remember, China is a command- state. They can do what they want to do. That's the bottom line. They choose not to.
Federal Newswire
Where can people go to follow you and get a copy of your book?
John Cassara
Go to my website www.johncassara.com. My latest book is available on Amazon–both the print version and the e-versions. I'd appreciate all the support I can get. I'm doing this because I have a passion. I'm trying to get people to become more and more aware, and I need help to get the word out.
