China-linked money laundering groups may have funneled more than $300bn through US banks in the past five years, often to the benefit of Mexico’s most powerful drug cartels, according to a US Treasury warning reported by the Financial Times.
The Treasury’s Financial Crimes Enforcement Network (FinCEN) said that between January 2020 and December 2024, banks flagged roughly $312bn in suspicious transactions tied to Chinese underground banking networks. These groups, it noted, have become key partners for cartels such as Sinaloa and Jalisco New Generation, which dominate Mexico’s fentanyl trade.
According to FinCEN, the networks rely heavily on “money mules” — often listed as students, retirees, or housewives — who accumulate unexplained wealth while moving vast sums across borders. The system is attractive to Mexican cartels in part because of restrictions on US dollar deposits in Mexico, which were introduced to curb drug financing.
The laundering schemes hinge on three-way transactions: US drug dealers offload dollars, which are exchanged into pesos for cartels in Mexico, while Chinese citizens — eager to evade Beijing’s strict capital controls — provide yuan to complete the cycle. The same networks help move proceeds from fentanyl sales, a drug that has surged in demand across the United States over the past decade.
Many precursor chemicals for fentanyl production still arrive from China through Pacific ports in Mexico, where cartel factions fight over supply routes and territory.
The warning comes as US President Donald Trump has intensified his administration’s campaign against both China and Mexico, framing fentanyl as a top national security threat. Earlier this year, Washington designated eight Latin American trafficking groups as terrorist organisations, allowing military measures against them. In June, the US also sanctioned three Mexican banks accused of involvement in laundering cartel funds, sparking fears across Mexico’s financial sector.
Analysts note that the FinCEN advisory may carry political weight as well as security implications. “It creates more turbulence with anything related to China … it adds distrust to the Chinese market,” said Mexican criminal lawyer Ilan Katz, speaking to the Financial Times.
Mexico’s President Claudia Sheinbaum has increased drug seizures and arrests since taking office, though she has resisted Trump’s push for an expanded US military role against the cartels. Meanwhile, Chinese officials have defended their own enforcement of chemical exports, with Beijing’s ambassador to Mexico accusing Washington earlier this year of “scapegoating China for its own problems.”
The findings highlight the global complexity of fentanyl trafficking — a trade that ties together Chinese underground finance, Mexican cartels, and US consumers in a cycle of drugs and illicit money flows that authorities have struggled to contain.
