Chinese brokers launder hundreds of millions for global crime groups | FT Film

Chinese money launders have partnered with Mexican drug cartels to efficiently launder the proceeds of the fentanyl trafficking law enforcement in this country has not got sufficient tools to tackle it they really On The Rise as the dominant moneya laundering Networks these are franchise models highly sophisticated they could be stood up quickly and move a lot of value in a lot of different directions simultaneously the scale and the scope of this is really quite extraordinary we started bringing all the elements of the government together because it was a national security issue it was a matter of life and death [Music] [Music] in 2017 and 18 something significant happened we didn't know why we couldn't understand why suddenly Chinese money Brokers began to control the laundering of Mexican cartel proceeds and they started to do it for 1 to 2% those were charges or broker fees that were unheard of we believe that the Mexican cartels increase their bottom line their net profits by 3 to 5% by simply partnering with Chinese money launders in the 1990s as China liberalized economically as Chinese uh business started moving around the world a system of Chinese underground banking or money exchange system developed in places where Chinese businesses were expanding catering to businesses often operating with legal Commodities in legal economies but needing to move money they would not be able to move through the Chinese banking system and what these underground Banks do is they transfer money according to something that's called Mirror transfer a person let's say on the one end of the network will arrive with a sack full of of money in cash deposit it at the underground bank and then through this Mirror transfer another person will pick up the same amount of money from the other branch of the same underground banking Network The crucial thing about this is that no money has actually been transferred it's completely invisible to the authorities that might wish to crack down on it this illicit money finances all kinds of things it finances shopping spree by Chinese consumers who want to buy luxury in Europe it also finances we have evidence the international drugs trade and is particularly Germaine when we think of the big crisis of fenil that's currently affecting the United States as we continue our coverage the DEA reports fentel overdose it is the leading cause of death among those under the age of 50 and they're warning communities that one pill can kill the deadliest drug threat our country has ever faced I cover law enforcement here in New York for the financial times and in the course of meeting with a former DEA agent in a Manhattan skyscraper halfway through our meeting he said forget what you're working on now I have a far bigger story that's being ignored the fenal crisis that is probably the biggest killer of Americans under 50 is being fueled by Chinese moneya laundering and law enforcement in this country has not got sufficient tools to tackle it for decades the drug cartels operating in the US had developed a very sophisticated system for money laundering they would put the cash on trucks they would drive them across the border they would find ways of sending the money to people in the US who needed cash and would buy products with them Etc but the DEA and uh enforcement agencies Across America Had A playbook for how to tackle this all of that changed with the fenel crisis when I first heard about this a few people told me you have to speak to this guy Ray Donovan he' be one of the first to identify this problem suddenly Chinese Nationals were popping up everywhere in the surveillance of the fental trade to an extent that they hadn't been before and he and his team realized something was going on [Music] here my name is Raymond Donovan I am the former Chief of operations for The Drug Enforcement Administration so I grew up in in an Irish neighborhood up in the Bronx but then we moved to a neighborhood where was all Puerto Rican I saw drugs decim made parts of my family in the 70s in particular heroin I became an expert not only in cartel but really being able to exploit comms or Communications in the 90s cocaine was just fallen from the sky my first year we seized here in New York City 7,000 kilos of cocaine when you're intercepting tens of thousands of kilos you're really causing a lot of harm to the cartel we were focused in primarily on tractor trailers coming from the west coast to the east coast in 2012 I was assigned to the special ops division sod is basically the hub for the world uh as it relates to narcotics investigations and criminal networks a while at sod I developed the team we collectively pursued Chapo guzma we never really focused in on Chinese organized crime you know our Focus was on caloa cartel yeah we're in Brooklyn near to downtown Brooklyn it's a warehouse area it's an area that is known for receiving shipments of drugs coming in from uh Mexico or from other states across the United [Music] States we started realizing that the Chinese organized crime was not only involved with supplying all the precursor chemicals to Mexican cartels for production of elicit narcotics they were also really taking over the international money laundering aspects of the entire drug trafficking as we know it across the United States another fenel bust in the Bronx just blocks away from the daycare where a one-year-old boy died in the stores we would see an organization that we identified through our investigation that was a fentel um distribution network uh dropping off drug proceeds to a a Chinese money launderer here in New York City and then that launder would then bring money through our investigation to an MSB or money service provider in flush and queens and from there we launch a different sort of investigation that became more about following the paper trail of how the money is leaving through these stores because they were fronts often you'll see um a business that uh from the outside looking in it looks like it's one business but once you walk inside there's multiple businesses within and um that's you'll see that they'll have a moneyy service provider set up to launder illicit drug proceeds on behalf of the criminal organizations we had a saying all roads lead back to Flushing the reason we said that is we identified command and control leadership all these things sort of centered back to Flushing Queens my name's Chris irvan I'm a managing director with nardello and Co which is a global investigations firm prior to nardello I spent 24 years with the DEA as a special agent this is Mexico this is the United States and this is China the currencies do not cross borders the pesos the dollars the Chinese R&B think of billion dooll pots of each currency in those countries let's look at the Mexican cartels they produce fentanyl they ship a large shipment of fentanyl to New York to a drug distribution gang in New York they then sell that fenol and they say they have a million dollars that they need to have launder back to the Mexican drug cartel they contact the cartel and say we have a million dollars that we want to move back to you they contact the Chinese money broker in Mexico that Chinese money broker via we check contacts a Chinese broker in New York saying a millionar needs to be picked up Mexican cartel contacts their drug distribution arm and says this Chinese broker is going to pick up the million they arranged for that pickup it's brought back to a stash location where they're collecting drug proceeds controlled by this Chinese money broker Chinese money broker sees that the money is there a million dollars we chat messages the Chinese money broker and says I have the million dollars at this point in time those funds are released to the Mexican cartel they've now been made whole their funds have been laundered for them that million dollars now is sitting in a Stash House controlled by Chinese money launders they then get on WeChat or a bulletin board and advertise the sale of those US Dollars within the United States once those dollars were put on weat Chinese Nationals whether they be back in mainland China or within the United States want to buy dollars in this example he's going to buy $100,000 this Chinese National has been introduced by this Chinese broker in mainland China by this Chinese broker before he actually gives him the funds the transfer is made bank to bank soon as that's done he provides the cashier check or the funds he now has the funds he's done he's made his money he's invested in the US in the beginning of this we were trying to understand it we were following these individuals and they were picking up millions of dollars they followed one of these Chinese couriers who had picked up money back to a block and lost him on surveillance right that was later at night it was dark some Flushing Queens and they decided let's get out let's walk the block and determine if we can see where he went or where he was as they were walking down the street they heard what they thought to be money counters right so when they went closer to this building on the first floor they had had the window open just a little bit and there were six to eight money counters being run and over $10 million in this stash location that was the amount of money that they had to bring in account showed the flow of money because they were selling that money the next day to a Chinese buyer that wanted to invest in the United States now you can couple that around the world you could say that in Africa we noticed Chinese organized crime where there was a Chinese diaspora right and there was a Chinese infrastructure project and dramatic amounts of money Chinese organized crime paralleled those efforts the same thing is happening whether it being an Italy or throughout Europe when you have larger Narco proceeds that need to be laundered back to Colombia Mexico or somewhere else around the globe Chinese money launders are relied upon to do that on a much greater scale than they were in the past they're very sophisticated they're very professional and they can get the job done quickly [Music] [Music] so [Music] PR [Music] Thea it was born in the province of REO calabrian and in particular in the mountains of ason [Music] aspromonte is one of the most geographically challenging areas of Calabria it is a constellation of about 33 Villages all around the same Mountain Area the saluca based Clans are well vering particularly important for the cocaine trade arriving at the Porto jataro still today terminal P container Jo [Music] at e [Music] [Music] [Music] V or [Music] Maro for for [Music] underr banking [Music] underground banking [Music] fr [Music] for for [Music] [Music] but first up tonight more students overdosing at a local high school this time it's happening in Lon County all beli to be fenal La pills I like talking to the addicts figuring out their story figuring out how it was they start telling you about how you know they were prescrib medicine then they went to the the the heroin all right and got addicted to the heroin and the heroin just wasn't the high wasn't getting they were taking more and more of the heroin and then the fentanyl came on the market and it was so much stronger and that's all they wanted the cartels they see the opportunity to make money and it's just like the street dealers around here they see the opportunity to make make the quick money and they can make a lot of money real fast I'm Deputy will Sullivan with the County Sheriff's Office I'm assigned to the Tactical support unit I also work with our drug and gang unit and I do uh traffic stops for them too fentanyl it's blown up in this area it's a really horrible horrible drug what it's done to people we're getting more and more of it on the street now you used to get just a little a little bit of it now you're getting a lot of it it's taking over people's lives they're making lots of money on this stuff and the dealers push and push more and more and you're getting bust now where you're getting thousands of pills at a time lots and lots of money and cash we're seeing the end result of what is a an international major problem my name is Mike Chapman I'm the sheriff here in Lowden County of Virginia been the sheriff for just over 12 years just got reelected uh prior to that I serve 23 years with the Drug Enforcement Administration all over the globe this is a photo of me and uh uh sitting in the field of poppies up there by the uh Northwest area of Pakistan near the deer District up there uh not too far from I don't believe from the kyber pass if you look back to 20 2020 or so you had about 93,000 overdoses nationally uh overdose deaths nationally okay so you jump up a year and it goes up to like 103,000 in 2021 uh 2022 goes up to 106,000 and last year it's 112,000 we're losing more people in the year to drug overdoses than we lost soldiers in Vietnam over a 10e period twice as many so this is really significant and this is something that we really have to take head on in every direction because it's so prevalent and we really need to stop this the problem with fentanyl is that you can produce so much and it takes so little to overdose oh you're talking about a lot of pills that you can get across the border and it doesn't doesn't take up much space and it's so deadly and it's easy to distribute this story is about greed they don't care about parents losing their kids they don't care about kids losing their parents they don't care about any of that all they care about is this and it's something that we've got to do do everything we can to [Music] stop the select committee will come to order uh at the outset I want to recognize that we are privileged to be joined today by families who have been directly impacted by the fentanyl crisis here in the United States this hearing and the information that we are about to provide is for them and for those that they have lost Mr Donovan you recognized for your opening remarks good morning chairman Gallagher ranking member chrishna Mory and distinguished members of the committee my name is Ray Donovan I would like to thank you for giving me the opportunity to testify before you today on the pressing issue of f of the fentanyl crisis and China's role in feeding this emergency striking Americans in areas of public health law enforcement and National [Music] Security a being as deadly as fentel was we said enough's enough and we started bringing all the elements of the government together to really focus our energies and our efforts towards these groups because it was a national security issue it was a matter of life and death project sleeping giant was our intent to put a big Spotlight on Chinese organized crime and criminal groups that work hand inand with Mexican cartels [Music] worldwide so when Ray Donovan told me about this operation sleeping giant that he had set into Motion in around 2016 I started to research this operation and could find only a single reference to it in a budget document in a federal budget document anywhere really which seems to suggest that the DEA was n taken as seriously as it might have been there really wasn't enough of a link up between the various arms of law enforcement between the treasury which is supposed to monitor cash transactions between the FBI between the Department of Justice these were not really as integrated as you might have hoped in the face of a completely new threat I was a special agent in charge for the special ops Division and Chris was was coming into headquarters and so what I did was I asked Chris to be in charge of what we call the counter threat team so as this threat was evolving the Insight was evolving project sleeping giant was created to gather whatever we could pull in that was judicially acquired or through our sources we did that and we started to gather insight and then we were be able to provide insight to the field how is your case in La a money loer connected to command and control in New York how was this seizure that happened in Denver how is that connected to command and control in New York and it's amazing when you get agents in the room and we talk about these cases and we would have strategy meetings Under the Umbrella of project sleeping giant we have great human sources that we've recruited over decades they started to provide information we started to understand that there was this Global Network that was at scale that could move money with speed within a day unheard of before we want to talk about the xishi Lee investigation and he pled guilty here recently in eastern district of Virginia and he was an amazing money launderer and he was the first one that we investigated and we took down his organization he had a casino in Central America that he had established he had strong Triad links back in mainland China he traveled there and he had a sophisticated network with in the United States to pick up those funds and Lee was one of those Brokers that was at a very high level so what it allowed us to do was gather that information that intelligence gather that evidence we had an opportunity through the investigation to acquire ledgers and transactions and what he had been participating in so it was what I would call a traditional takedown we got the whole network so I had the opportunity to sit in those debriefings and I was exped by the scale that this was happening the level of discipline the level of sophistication and you can imagine dozens of XI Lees operating in the United States Mexico Central and South America establishing casinos establishing front businesses very difficult to do another component of the challenge there's not very many Mandarin speakers in DEA there's not very many Mandarin data scientists in EA the challenge of getting people with good Mandarin skills uh and Chinese cultural background is that security people are very reluctant when somebody comes in and they do have good Chinese but they also have an extensive network of relationships in China [Music] my name is Dennis Wilder I spent 36 years in the Central Intelligence Agency I worked at the White House for George W bush as his special assistant and senior director for East Asia the fentel issue has been an enormous domestic issue in the United States and China's role in the sale of precursors to drug dealers has been a big thorn in the side of uh us politics so the Biden Administration for quite a while now has been trying to get the Chinese to restart our cooperation which ended in 2019 on this topic we have very quickly moved to a mode where the ministry of public Security in China and other organizations seem to be cooperating quite closely to begin to try and shut down the fentanyl flow from China Mr President critical Global challenges we Face from climate change to counternarcotics to artificial intelligence demand our joint efforts both the United States and China were seeking to put a floor underneath the threefold of the relationship the level of tensions and hostilities have been the greatest in decades I am wonderful B Brown senior fellow at the Brookings institution where I direct Brookings work on transnational threats such as illegal economies organized crime terrorism Civil War the anti-money laundering element is now part of this counternarcotics cooperation the elicit side of the informal banking system the underground banking system uh grew in tandem with uh the regrowth of the Chinese tries in the 1980s and particularly 1990s just as China was liberalizing opening up economically criminal groups like The Triads were growing and expanding their reach first in Southeast Asia then into the Pacific countries of New Zealand and Australia subsequently to other parts of the world there have been whole books written on organized crime in China historically and this is not a new problem the guandong the Nationalist party used them during the Civil War the Communists used them during the Civil War and afterwards places like Hong Kong we have seen uh the government using them to go after democracy [Music] protesters in China today there are many business people entrepreneurs with large amounts of money who are scared of the Chinese government she ping in recent times has been cracking down on private entrepreneurs people have disappeared in the business Community without any information not even put into the legal system in China simply taken into custody and so we see the business class in China looking to get some of their money out as an insurance policy I'm sure you've heard the stories of Singapore where a huge number of these business people are setting up bank accounts offices and there is a real question of how they're getting this money out of China since there are strict controls on taking money out of China and I think the answer is of course they're going through moneya laundering schemes and illegal uh activities to do this [Music] we hear experts tell us that the movement of illicit Chinese money of capital flight from China these days is a virtual tidal wave and there are very good reasons for that the Chinese Capital markets are are in really bad shape Chinese stock indices have been plunging Chinese property values have been going down sharply so there's all kinds of incentives for Chinese people to send their money abroad either to invest in foreign assets or simply to to buy stuff in the past we've looked at this issue and several hundred billion US doar worth of capital flight has exited China and gone around the world at the moment it's quite possible that the amount of Chinese money leaving China exceeds even those very high levels the National Crime agency of the UK has actually given it a formal name it's called informal value transfer system ivts and it really lies at the heart of the movement of Chinese illicit money all over the world this is more overt now as a service some of them are advertised on the internet some of them are advertised on social media crime as a service and laundering as a service has become a much bigger thing I'm s mey I'm the head of elicit Finance in the National Economic crime Center the National Economic crime Center is part of the National Crime agency an underground Banker might be sat in the center of you know dozens maybe even hundreds of transactions and that just shows how sophisticated they need to be in terms of their operations so they need to be a professionalized outfit they need to be highly organized they need to operate like almost like a bank you know keep Ledges understand the scale of the cash pools in various different jurisdictions understand the liquidity available to them and that's not easy so to do that you need infrastructure and you need clever people sophisticated people and you need lots of people it's something that we're seeing as a growing threat to the UK and across the world since Capital controls were imposed in China it's become much harder for Chinese citizens to get money outside of China to spend that money abroad so for example if you want to get a million pound out of China so you're transferring a million pounds worth of value from one country in this case China to the UK so by exchanging that value that pool of cash that money needs to exist in a separate jurisdiction so what underground Bankers are doing is turning to organized criminals as a readily available source of cash and liquidity to be able to settle those remittances so they are tied in with organized crime in the United Kingdom who generate huge amounts of cash usually from the drugs trade and they're using that liquidity in that trade to settle the remittances in this example to allow that 1 million to be transferred out of China and into the UK underground Bankers will use a lot of methodologies to get that illicit cash into their hands and into the mainstream Financial system money mules are a really common tactic and they can often be people that are unwitting or people that don't fully understand the criminality that they're involved in what they'll do is advertise on social media and say would you like some money and all you need to do an exchange is let us use your bank account what they'll also do is create more bank accounts outside of the mainstream financial institutions and look towards electronic money institutes or Challenger Banks where actually you can set up bank accounts far more quicker and the level of onboarding for those bank accounts are less rigorous so you can do it on a mobile phone app if you can get 10 20 100 people to work for your organization then you can Smurf that money into the legitimate financial institutions and that means breaking it down into smaller chunks that are hard to detect they're undermining the banking system and they're exploiting the banking system financial institutions don't have the benefit of the intelligence that the federal government has [Music] I do think about it often I gave it everything I had I left it all out in the field it's an uphill battle and it continues to be an uphill battle the money continues to float the technology continues to advance the criminal groups are more and more interconnected they're not going to stop [Music]

Channel: Financial Times

Views: 1,023,214

Keywords: business news, finance analysis, Financial Times, finance news, international news, global news, markets, china trade, us economy, brexit, news, business, tech, india, finance, drug trafficking, drugs, drug cartel, Mexico, China, Italy, money laundering

Id: EjGIp7kdS6E

Length: 39min 4sec (2344 seconds)

Published: Fri Jun 21 2024