Chinese Money Launderers’ Guilty Pleas Highlight China’s Role in America’s Fentanyl Crisis

Two Chinese-born individuals pleaded guilty last week to laundering tens of millions of dollars of drug proceeds in coordination with individuals in China and other countries. The case highlights the role played by Chinese money laundering organizations and the Chinese financial system in the fentanyl crisis killing Americans.

Li Pei Tan, a Chinese-born man living in the U.S. state of Georgia, and Chaojie Chen, a Chinese national residing in Chicago, traveled throughout the United States to collect cash proceeds from Mexican cartels’ drug sales, including fentanyl sales. CNN reported that Tan and Chen’s arrests were part of a multi-year law enforcement effort.

Agents from the Drug Enforcement Administration (DEA) tracked Chen over five years throughout the east coast, stopping him in Detroit, Chicago, and Ohio. The Department of Justice alleged that Chen was talking with a “major international money launderer and drug trafficker based out of mainland China.”

Law enforcement officials seized hundreds of thousands of dollars from Chen and $197,000 from Tan in South Carolina. Chen and Tan pleaded guilty on October 30 to conspiracy to commit money laundering, and they face a maximum sentence of 20 years in prison. They forfeited numerous assets and more than $270,000 in seized currency. Chen and Tan also agreed to the imposition of money judgments over $23 million.

In the February 2024 National Money Laundering Risk Assessment, the Department of the Treasury called Chinese money laundering organizations “one of the key actors laundering money professionally in the United States and around the globe.” The money launderers provide near real-time payments to the Mexican cartels while absorbing losses, thereby offering drug traffickers the ability to run a cash business inside the United States.

The money laundering scheme is designed to defeat international anti-money laundering controls, which primarily focus on ensuring that illicit proceeds do not enter the legitimate financial system and are not transferred across borders. In an illustrative example in Treasury’s assessment, the money launderers collect cash from drug proceeds inside the United States and provide pesos to the cartels in Mexico.

The money launderers then sell the cash, minus a fee, to Chinese individuals who want to transfer assets to the United States but need to evade Chinese currency controls that limit cash transfers to $50,000 per year. The money launderers and buyers transfer the equivalent within China’s financial system for the subsequent purchase of items that can be sold in China or Mexico for pesos.

Following President Joe Biden’s November 2023 meeting with Xi Jinping, China officially prohibited the export of fentanyl precursors and increased law enforcement cooperation, including the arrest of one Chinese money launderer.

Treasury has used sanctions to complement the Justice Department’s investigations, targeting both the purchase of equipment for producing counterfeit pills and members of a U.S.-based Chinese money laundering organization.

Treasury’s Financial Crimes Enforcement Network finally updated its 2019 advisory to financial institutions on fentanyl in June, highlighting new trends in the fentanyl supply chain and tips for increasing vigilance against illicit transactions.

But the United States is still playing defense against the global drug trafficking and money laundering network that is perpetuating the fentanyl crisis. China has been reluctant to force its banks to proactively monitor these transactions. If these transactions were supporting Uyghurs in Xinjiang or Taiwan’s independence, the Chinese Communist Party (CCP) would shut them down immediately. Washington should use sanctions to incentivize the CCP to curtail the fentanyl transactions.

A new U.S. president will be inaugurated next year and must focus on stopping the fentanyl crisis that is killing a generation of Americans, including 74,000 last year alone.

Anthony Ruggiero is an adjunct senior fellow at the Foundation for Defense of Democracies (FDD). He previously served in the U.S. government for more than 19 years, including as senior director for counterproliferation and biodefense on the National Security Council (2019-2021). For more analysis from the author and FDD, please subscribe HERE. Follow Anthony on X @NatSecAnthony. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focused on national security and foreign policy.