Burner phones and banking apps: Meet the Chinese ‘brokers’ laundering Mexican drug money
04 Dec 2020

Early next year, a Chinese businessman named Gan Xianbing will be sentenced in a Chicago courtroom for laundering just over $530,000 in Mexican cartel drug money.

Gan, 50, was convicted in February of money laundering and operating an unlicensed money-transfer business that whisked cartel cash from U.S. drug sales offshore. Gan has maintained his innocence; his lawyers say he was entrapped by U.S. authorities. The trial garnered few headlines and little of the public fascination reserved for kingpins of powerful narcotics syndicates that U.S. federal prosecutors said Gan served.

Still, U.S. law enforcement officials told Reuters that Chinese “money brokers” such as Gan represent one of the most worrisome new threats in their war on drugs. They say small cells of Chinese criminals have upended the way narcotics cash is laundered and are displacing the Mexican and Colombian money men that have long dominated the trade.

Virtually unheard of a decade ago, these Chinese players are moving vast sums quickly and quietly, authorities said. Their expertise: routing cartel drug profits from the United States to China then on to Mexico with a few clicks of a burner phone and Chinese banking apps – and without the bulky cash ever crossing borders. The launderers pay small Chinese-owned businesses in the United States and Mexico to help them move the funds. Most contact with the banking system happens in China, a veritable black hole for U.S. and Mexican authorities.

Chinese money brokers based in Mexico “have come to dominate international money laundering markets,” U.S. prosecutors said in a Sept. 24 sentencing memorandum for Gan’s case.

Reuters spoke to more than a dozen law enforcement officials, diplomats, lawyers and sources familiar with the Gan case or Chinese money laundering techniques. The news organization also examined more than 1,500 pages of documents from the trial. The material included previously unreported details about how the ring operated compiled by prosecutors and agents of Homeland Security Investigations, the investigative arm of the U.S. Department of Homeland Security that led the probe.

What emerged was a blueprint showing how some groups of Chinese money brokers have become key cogs in the multi-billion-dollar drug empires run by Latin American cartels. The Chinese role presents a formidable challenge for U.S. anti-narcotics efforts at a time of rising tensions between Beijing and Washington.

Gan, who U.S. prosecutors said operated a tight ring with another Chinese money broker, was apprehended in November 2018 by Homeland Security Investigations agents at Los Angeles International Airport on his way to Mexico from Hong Kong. The U.S. government said that Gan had moved anywhere from $25 million to $65 million in illicit drug proceeds from 2016 to the time of his arrest, according to a September court filing by Gan’s attorneys.

Based in Guadalajara, the ring is believed to have worked with multiple syndicates, including the famed Sinaloa Cartel that was previously led by jailed Mexican drug lord Joaquin “El Chapo” Guzman, according to two U.S.-based sources familiar with the investigation.

The U.S. Department of the Treasury and Europol, the European Union’s law enforcement arm, have warned about the expanding web of Chinese crime groups laundering drug money. Europol in November 2019 said these groups present a “growing threat to Europe,” while the U.S. Treasury in February placed Chinese professional money laundering networks on its list of “key threats” and vulnerabilities within the U.S. financial system.

U.S. law enforcement has stepped up operations against these groups. In addition to the Gan case in Illinois, federal prosecutors have brought charges in Virginia and Oregon against alleged members of at least two other Chinese money laundering rings since October of last year. Those cases are pending.

Still, a senior U.S. Drug Enforcement Administration (DEA) agent said U.S. efforts to nail Latin American drug capos by following the money have gotten much more difficult.

“I can’t emphasize this enough, the involvement of the Chinese has really complicated all of these schemes,” the DEA official said.

Gan, who declined to testify in court, pleaded not guilty to three counts of money laundering, one count of conspiracy to launder money and one count of operating an unlicensed money transmitting business. He was acquitted on the conspiracy charge. Reuters did not receive a reply to requests for comment from Gan sent to his legal team.

His lawyers, in a September sentencing plea document, said Gan was not the mastermind of the operation, rather a seafood exporter who was duped into letting his bank account in China be used to launder money by another Mexico-based Chinese national named Pan Haiping. Glenn Seiden, Gan’s lawyer, declined to speak with Reuters or answer questions about Gan’s case.

Attorney Aaron Schwartz, who was part of the defense team, said he wanted to make it clear that Gan did not cooperate with the U.S. government because his client feared for the safety of his family in Guadalajara, where the powerful Jalisco New Generation cartel holds sway. Gan’s lawyers also allege Gan was entrapped in a sting operation by Homeland Security Investigations agents working with an informant who helped arrange the transactions that resulted in their client’s conviction. The agency said it does not comment on ongoing investigations.

Pan Haiping, Gan’s alleged associate, was detained earlier this year in Mexico on accusations of money laundering and is awaiting extradition to the United States, according to the two U.S. sources familiar with the investigation and a senior Mexican federal police source. Pan Haiping could not be reached for comment. The Mexican prosecutor’s office declined to comment on Pan Haiping’s case or provide the name of his legal counsel in Mexico, saying it cannot comment on ongoing cases.

In a March 2019 U.S. indictment unsealed a few weeks ago, Pan Haiping was charged with laundering almost $500,000 for Mexican cartels; running an illegal money transmitting business in Illinois; and conspiring to launder money using bank accounts in China, including an account belonging to Gan.

Another alleged conspirator, Long Huanxin, was arrested in February at Vancouver International Airport by Canadian law enforcement acting on a warrant from U.S. authorities, according to Canadian court transcripts from Long’s detention hearing. Long was extradited to the United States, and last month he pleaded not guilty in Chicago to charges of money laundering for Mexican cartels, U.S. court documents show. Long’s lawyer did not respond to a request for comment.

U.S.-CHINA TENSIONS

U.S officials informally sought assistance from China in the Gan case but received no support in their investigation, according to the two U.S. sources familiar with the probe.

China’s Foreign Ministry disputed their account. The ministry told Reuters in late October that it did not receive a request from U.S. authorities for help on that case. China stands ready to cooperate with the United States to “destroy drug cartels and drug-related money-laundering networks,” the ministry said in a statement. But it stressed the need for the two countries to work on the “principle of respecting each other’s laws, equality and mutual benefit,” the statement said.

The ministry said most Chinese bank-account holders about whom Washington has inquired as part of its money laundering investigations in recent years were “legitimate enterprises and individuals” in China. “After we asked the U.S. side to provide drug-related clues or evidence of enterprises and individuals, the U.S. side has not responded,” China’s Foreign Ministry said in the statement.

Without help from Beijing to track money flows in China and to infiltrate the laundering networks, U.S. agents say they face an uphill struggle to catch culprits.

“It’s the most sophisticated form of money laundering that’s ever existed,” one of the U.S. sources familiar with the investigation said.

By Drazen Jorgic, Reuters, 3 December 2020

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