InSight Crime looks at how colossal amounts of money are being laundered, the seemingly legitimate businessmen behind it all and why US prosecutors are stumped about how to proceed.
In late April, a US-based Chinese citizen, Gan Xianbing, was sentenced to 14 years in prison for running a scheme where money from Mexican criminal groups was picked up in Chicago, transferred to bank accounts in China and then ultimately sent back to Mexico.
In 2018, Gan handled approximately $534,206 in drug money before being arrested at Los Angeles Airport in November 2018, during a layover while flying from Hong Kong to Mexico.
Gan has since become the most well-known, but far from the only, Chinese money launderer connected to some of Latin America’s most dangerous criminal groups, including the Sinaloa Cartel.
“The defendant was part of a recent phenomenon in which a relatively small network of Chinese money brokers based in Mexico have come to dominate international money laundering markets,” stated Assistant US Attorneys Sean J.B. Franzblau and Richard M. Rothblatt in Gan’s sentencing document.
Two other key figures have emerged since Gan’s arrest, two Chinese citizens, Pan Haiping and Long Huanxin. Both men are believed to have been working with Gan, handling the drug money proceeds received in Chicago and ensuring their laundering through Chinese bank accounts. They ensured that no money was ever transferred between China and the United States, helping them to avoid detection. Long was arrested in February 2020 at Vancouver airport in Canada before being extradited to the United States on charges related to Gan’s. Pan Haiping has been arrested in Mexico and is awaiting extradition to the United States.
These men presented themselves as legitimate businessmen and had little to no entanglements with the law. Long was the purchasing manager for his family’s toy and clock business, selling products in Mexico, where he had investments in hotels and restaurants. Gan owned a seafood business in Guadalajara, exporting jellyfish to China, according to Reuters.
“Many of these brokers are also engaged in legitimate business, and use that business as cover for and to further money laundering activity,” said US attorneys in Gan’s sentencing memorandum.
While this ring is the latest involving Chinese money launderers, it is not the only one to be uncovered.
Last September, Wu Xueyong was sentenced to five years in prison by a federal court in Virginia and agreed to forfeit over $4.2 million in laundered drug proceeds coming from cocaine trafficking in the United States. Wu’s scheme worked identically to Gan’s with the money never actually being transferred from China to the United States.
Large sums of money being transferred between China and the United States on a regular basis might raise suspicion. Therefore, these launderers chose a scheme that ensured this would never happen.
One of Gan’s associates, a Singaporean national named Seok Pheng Lim testified to prosecutors that she was coordinating several weekly pick-ups from representatives of Mexican criminal groups, made in cash ranging between $150,000 and $1 million, with an average of $500,000. These were made in large cities including Chicago, New York and Atlanta. Lim’s involvement lasted an estimated 63 weeks between March 2016 and May 2017, during which time she and her other couriers picked up in excess of $25 million, prosecutors estimated.
Once the cash was in the hands of the launderers, they contacted one among a network of Chinese-owned businesses in the United States and Mexico. They asked them to transfer a correspondent amount of money through Chinese banking apps. This happened entirely through the Asian country’s domestic banking system and outside the purview of US authorities.
Gan actually mentioned this in his defense, according to Reuters. His lawyers stated that, far from being a money launderer himself, he had been duped by Pan Haiping and allowed his Chinese bank account to be used for these transfers.
This technique also allows the laundering process to avoid scrutiny in China. The country’s financial regulators limit private individuals from handling more than $50,000 in foreign currency and any transfers surpassing this limit must be granted special dispensation. However, there is no such limit on domestic transfers.
The sheer amounts of dirty money being laundered in this way are a cause for alarm among US prosecutors. And yet these schemes are not new. In October 2020, an unsealed indictment from the US Justice Department charged six Chinese nationals with laundering over $30 million for Mexican drug traffickers over a period of 12 years.
But regulating the use of Chinese banking apps from the United States and Mexico is no easy task.
China has not seemed eager to help. Two sources within the US justice system told Reuters in December that requests for support had not been answered.
The Chinese government disputed this account and stated no such request was received. According to a statement from the country’s Ministry of Foreign Affairs, other requests from the United States related to money laundering had concerned “legitimate enterprises and individuals” in China.
It is currently uncertain to what extent the businesses and people used to move this money within China are even aware of the illegal nature of these transactions, making it all the more difficult to crack down on these schemes.
“It’s the most sophisticated form of money laundering that’s ever existed,” one of the US sources told Reuters.