Chinese Money Laundering Organizations Undercut Cartels Via Dual Markets

Key Quotes

"Federal officials say Chinese money launderers moved more than $300 billion in illicit transactions through U.S. banks and other financial institutions in recent years."

This quote from the episode description highlights the immense scale of illicit financial activity. Dylan Tokar, a reporter for WSJ, is exploring how these schemes operate and the federal investigation into them. This figure underscores the significant challenge law enforcement faces.

"Investigators allege that Yu is part of a new wave of sophisticated money launderers all with ties to China who are laundering money for powerful Mexican drug cartels and operating at such a scale and efficiency that it blows traditional money launderers out of the water."

Dylan Tokar explains that Jia Yong Yu is allegedly part of a sophisticated group with Chinese ties laundering money for Mexican drug cartels. This quote emphasizes the advanced nature and high efficiency of these new operations, distinguishing them from older methods.

"The money laundering side is a window into the larger organization you know if you want to pursue drug traffickers you could be on the street following people around watching them do deals watching them pass drugs to people and picking up money but it doesn't have any meaning until you actually start to see how the money that they are handling is getting to the people who actually own those drugs."

Julie Shemitz, a former federal prosecutor, articulates her guiding principle: "follow the money." She Schmitz explains that understanding money laundering provides crucial insight into the broader criminal enterprise, revealing how illicit funds connect back to the leaders of drug trafficking operations.

"There's a rule that limits how much money Chinese citizens can transfer out of the country. The cap is equivalent to about $50,000. The goal is to keep money in the Chinese financial system. The Chinese government really began to enforce this rule in 2016."

This quote, likely from Dylan Tokar, explains a key factor driving the rise of Chinese money laundering organizations. The Chinese government's strict enforcement of currency export limits since 2016 creates a demand for alternative methods to move money out of China.

"When a Chinese national in the United States gets money from a money broker from China, they pay a commission on it and they pay a hefty commission on it and this enables the Chinese underground banking organizations to charge less to the narcotics trafficking organizations for whom they are laundering those funds."

Dylan Tokar details how Chinese money laundering groups gain a competitive advantage. By leveraging commissions from Chinese nationals needing to convert currency, these organizations can offer lower rates to drug cartels, undercutting traditional money launderers.

"The way they're approaching the banks is they don't care whether the banks are going to flag the amount of money they don't care they're regularly depositing much more than $10,000 and basically they know that the bank is flagging this and they know that the bank could at some point shut down the account but in their experience the bank doesn't do that very fast."

Dylan Tokar describes the reckless approach of these sophisticated money launderers. He explains that they intentionally exceed bank reporting limits, understanding that while banks flag these transactions, the process to shut down accounts is slow, allowing them to operate with relative impunity.

"Wechat is based in China and they do not cooperate with U.S. law enforcement so unlike some other platforms there is no way to get information about subscribers or traffic on Wechat or certainly the content of any Wechat messages."

Julie Shemitz highlights a significant investigative challenge. She Schmitz explains that the encrypted nature and lack of cooperation from platforms like WeChat, which are based in China, prevent U.S. law enforcement from accessing crucial communication data, hindering investigations.

"I think it's the tip of the iceberg. I think there's a ton more going on. This is the challenge I think of being someone who in law enforcement who who is up against the the cartels. I mean they're operating at such a huge scale."

Julie Shemitz expresses her perspective on the scope of the problem. She Schmitz believes that the operation taken down is only a small part of a much larger network, emphasizing the immense scale at which cartels operate and the ongoing challenge for law enforcement.