The arrest of Bojun He, known as "El Chino," in Mexico City on November 4 has highlighted the role of Chinese financial intermediaries in laundering money for Mexican drug cartels. He was seized with $2 million and 43 million pesos and was identified as the alleged leader of a money-laundering network for organized crime, including the Unión Tepito cartel.
The 2007 arrest of Tomoiyi Yu and more recent cases involving Chinese fentanyl kingpin Zhi Dong Zhang are among examples of financial intermediaries who connected organized crime across continents and made it possible for dirty money to be legalized.
Víctor Sánchez, an academic at the Autonomous University of Coahuila, said people of Chinese origin or networks from the Asian country, some linked to triad organized crime groups, have been inserting themselves into the dynamics of Mexican criminal organizations. He said that perhaps alongside Albanian mafias, they may be the second-largest source country assisting drug traffickers with money laundering.
The advantages, Sánchez said, include intense trade between China and Mexico that provides cover for illegal transactions. "That means the opportunities to disguise illegal operations as legal ones are quite significant. Every shipment of Chinese goods arriving at Mexico's various ports can consistently become an opportunity for money laundering, and since so many arrive so frequently, keeping track of them all is impossible; it's the old adage of finding a needle in a haystack," he explained.
Chinese networks also charge the lowest rates in the market. Sánchez said other providers charge around 10% to 15% on average, while the Chinese charge between 3% and 5%. "Thus it becomes more profitable for Mexican organizations to turn precisely to the Chinese," he noted.
Pablo Pérez, an international expert on money laundering and asset recovery and CEO of RiskFlow, said one main method is triangulation among China, Mexico and the United States. China has an annual legal limit of $50,000 for citizens withdrawing foreign currency, so businesspeople and citizens seek to move capital in renminbi to invest abroad, such as in US real estate.
Pérez said Mexican cartels sell narcotics in the US and obtain cash dollars but need to return those funds to Mexico converted into pesos. To connect both needs, they use the Chinese informal banking system known as Fei Qian, equivalent to the historical Hawala system. "The Chinese investor hands over RMB in China to an informal agent and the network provides the equivalent in cash dollars in the U.S., money coming directly from the cartel's profits. To reconcile funds between China and Mexico, importing companies are used, for example, in appliances or telecommunications in Mexico. The Mexican importer receives products valued at a higher figure, say $10 million, but only pays a lower amount, $8 million, settling the difference through the network. Crypto assets such as Bitcoin are also used to transfer value without leaving a trace," Pérez added.
In the United States, he said, illicit cash is moved into the banking system by recruiting Chinese university students who deposit fractional sums at ATMs in exchange for living-cost payments. Funds are also injected into the accounting of Chinese-community businesses such as restaurants, currency-exchange houses and remittance agencies, where commissions of 5% to 10% are charged. Another method is fake invoicing for purported consulting services to justify purchases of luxury real estate.
Pérez pointed to the $500 million fine imposed by the US Treasury's Financial Crimes Enforcement Network on Bank of America due to internal control failures that allowed transactions linked to Chinese networks. "It is estimated that more than $5 billion passed through Bank of America without adequate controls. This issue is a priority for the governments of Mexico and the United States, and is part of the risk assessments of the Financial Action Task Force," he said.
Sánchez said this type of service is not only for the major players in organized crime. "Many turn to national channels because that's what they're familiar with or because of the contacts they have in their social circles, but in a city that's a bit more cosmopolitan and internationally connected, like Mexico City, it's not unusual for them to come into contact with foreign businesspeople." He said the presence of narco brokers is a trend that makes "perfect sense" for a "booming business" that needs to inject money into the legal economy. He added that money laundering is harder to detect in places where there is more money.
Analysis
Why This Matters
- The arrest highlights a cross-border financial infrastructure that enables drug trafficking and violence in Mexico and the US.
- Chinese money-laundering networks lower the cost for cartels to legitimize profits, potentially increasing their operational capacity.
- The methods described, triangulation, informal banking, student cash deposits, pose challenges for financial regulators and law enforcement.
Background
Chinese money-laundering networks have been operating in Mexico for decades, as shown by previous cases such as Tomoiyi Yu in 2007 and the wife of Zhen Li Ye Gon. These networks leverage the high volume of trade between China and Mexico to disguise illegal transactions. They offer lower fees than traditional launderers, making them attractive to both major cartels and smaller criminal groups like Unión Tepito.
Key Perspectives
- Víctor Sánchez, academic at Autonomous University of Coahuila: Says Chinese networks, alongside Albanian mafias, are likely the second-largest source country assisting Mexican drug traffickers with money laundering. He cites the advantage of intense trade flows and low fees of 3-5%, making them more profitable than other providers charging 10-15%. He notes this service is also accessible to smaller criminal groups.
- Pablo Pérez, international money-laundering expert and CEO of RiskFlow: Describes methods including triangulation among China, Mexico and the US; the informal Fei Qian banking system; use of crypto assets; recruitment of Chinese students to deposit cash in US ATMs; and fake invoicing for luxury real estate. He points to a $500 million Bank of America fine as evidence of the scale, estimating over $5 billion passed through without adequate controls.
What to Watch
- Whether Mexican and US authorities increase scrutiny of Chinese trade shipments and informal banking channels.
- Possible further arrests of brokers linked to Unión Tepito and other cartels.
- Implementation of stricter financial controls by banks following the Bank of America fine.
Checked
12 claims in this story checked against 1 source: 12 supported.
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- SupportedThe arrest highlights the role of narco brokers in Chinese money-laundering networks serving Mexican cartels.El País English: “His capture has highlighted the role played by brokers — or financial intermediaries — in Chinese laundering networks that act as the cartels’ economic arm.”
- SupportedChinese networks charge lower laundering rates than other providers.El País English: “while other providers of these services charge around 10% to 15% on average, the Chinese charge between 3% and 5%.”
- SupportedPérez describes triangulation, informal banking and crypto assets as laundering methods.El País English: “one of the main methods these Chinese networks use to launder funds is triangulation among China, Mexico, and the United States”
- SupportedBojun He, known as “El Chino,” was arrested in Mexico City on November 4.El País English: “Bojun He, known as “El Chino,” was arrested on November 4 in the Miguel Hidalgo borough of Mexico City”
- SupportedHe was seized with $2 million and 43 million pesos.El País English: “with $2 million and 43 million pesos, in both local and foreign currency.”
- SupportedHe was identified as the alleged leader of a money-laundering network for organized crime, including Unión Tepito.El País English: “The detainee was identified as the alleged leader of a money-laundering network for organized crime, including the Mexico City-based Unión Tepito cartel”
- SupportedThe 2007 arrest of Tomoiyi Yu and the case of Zhi Dong Zhang are cited as examples of financial intermediaries connecting organized crime across continents.El País English: “The arrest of El Chino recalls others such as that of Tomoiyi Yu in 2007 ... More recent cases include Zhi Dong Zhang, alias “Brother Wang,” the Chinese fentanyl kingpin”
- SupportedSánchez said Chinese networks may, perhaps alongside Albanian mafias, be the second-largest source country assisting drug traffickers with money laundering.El País English: “perhaps alongside Albanian mafias, they may be the second-largest source country assisting drug traffickers with money laundering”
- SupportedSánchez said frequent shipments of Chinese goods create opportunities to disguise illegal operations, comparing the difficulty of tracking them to finding a needle in a haystack.El País English: “Every shipment of Chinese goods arriving at Mexico’s various ports can consistently become an opportunity for money laundering, and since so many arrive so frequently, keeping track of them all is impossible”
- SupportedSánchez said other providers charge around 10% to 15%, while Chinese providers charge 3% to 5%.El País English: “while other providers of these services charge around 10% to 15% on average, the Chinese charge between 3% and 5%.”
- SupportedPérez said China has an annual legal limit of $50,000 for citizens withdrawing foreign currency.El País English: “China has an annual legal limit of $50,000 for citizens withdrawing foreign currency.”
- SupportedPérez said crypto assets such as Bitcoin are used to transfer value without leaving a trace.El País English: “Crypto assets such as Bitcoin are also used to transfer value without leaving a trace,”