Key Notes:
- The US Government continues to enhance a multi-pronged enforcement approach targeting cartels and related money laundering.
- FinCEN is increasing its focus on money laundering networks involving Chinese companies supporting fentanyl production and drug cartels. Sanctions of foreign banks by FinCEN may increase.
- Companies should review international banking arrangements for risk that banks may be sanctioned by FinCEN.
- Companies should ensure that their third-party due diligence adequately addresses these money laundering and cartel risks.
On August 28, 2025, the Financial Crimes Enforcement Network (FinCEN) issued a critical Advisory (FIN-2025-A003) and an accompanying Financial Trend Analysis (FTA) to alert U.S. financial institutions of the significant and escalating threat posed by Chinese Money Laundering Networks (CMLNs).
The first component, Advisory FIN-2025-A003, urges vigilance in detecting and reporting CMLN activity, outlines key typologies, and provides detailed red-flag indicators. The second, a Financial Trend Analysis, distills five years of Bank Secrecy Act (BSA) data to illustrate the scope, channels, and sectors most vulnerable to CMLN exploitation.
FinCEN describes CMLNs as sophisticated, global operations serving as the primary money launderers for Mexico-based drug cartels, including several designated as Foreign Terrorist Organizations (FTOs). FinCEN underscores that CMLNs have become the “professional money launderers” of choice for cartels such as the Sinaloa and Jalisco New Generation Cartels, citing their speed, reliability, global footprint, and ability to commingle illicit proceeds with funds from Chinese nationals seeking to evade the People’s Republic of China’s strict capital controls.
FinCEN’s analysis reveals a symbiotic relationship between CMLNs and cartels, driven by disparate regulatory environments. FinCEN’s latest publications make clear that CMLNs represent a significant and evolving risk for companies operating across multiple jurisdictions. While these alerts are highly relevant to financial institutions, they are also highly relevant to any companies operating globally.
Highlights from Advisory and FTA
The Cartel-CMLN Nexus: Mexican currency restrictions hinder cartels from repatriating large sums of U.S. dollars. Concurrently, the PRC’s capital controls limit the amount of currency its citizens can move abroad. CMLNs exploit this dynamic by “purchasing” illicit U.S. dollars from cartels and selling them to Chinese nationals who wish to move wealth out of the PRC.
Common Laundering Methods: CMLNs employ several sophisticated techniques to obscure the origin of illicit funds:
- Mirror Transactions: A U.S.-based CMLN receives illicit cash from a cartel. A counterpart CMLN in Mexico then transfers an equivalent value in pesos to the cartel, completing the laundering process almost instantly without cross-border wire transfers.
- Trade-Based Money Laundering: Illicit funds finance purchases of high-value goods in the U.S. (e.g., electronics, luxury items) that are exported to China, Mexico, or other jurisdictions for resale, thereby legitimizing the proceeds.
- Money Mules: CMLNs recruit individuals—wittingly or unwittingly—including students, retirees, or persons in low-income occupations, to open bank accounts, deposit illicit cash, and transfer funds.
CMLNs actively exploit vulnerabilities across the financial system, with a particular focus on depository institutions and the real estate sector.
Financial Institution Vulnerabilities: CMLNs pose a significant insider threat. FinCEN warns that these networks may “recruit financial institution employees to act as complicit insiders or infiltrate and place CMLN members within a financial institution.” Furthermore, they utilize high-quality counterfeit documents, including Chinese passports, to open accounts and circumvent customer due diligence (CDD) controls.
Real Estate Sector Exploitation: The real estate market is a primary target for integrating illicit proceeds. The FTA identified $53.7 billion in suspicious activity involving this sector. CMLNs use money mules and shell companies to conduct complex, layered transactions, often targeting high-value properties in markets with significant Chinese investor interest.
Nexus with Other Illicit Activities: The laundered funds are not limited to drug proceeds. BSA reporting links CMLN activity to a range of crimes, including:
- Human Trafficking and Smuggling: Over 1,600 BSA reports in the dataset indicated a nexus with this activity.
- Healthcare and Elder Fraud: The FTA highlights a scheme involving $766 million in suspicious activity linked to adult daycare centers in New York, which were used to launder proceeds from Medicaid fraud.
Expanding U.S. Government Focus on Cartels and Related Money-Laundering
The Trump Administration has intensified its campaign against drug cartels and transnational criminal organizations (TCOs), launching a coordinated, whole-of-government strategy aimed at the total elimination of these criminal networks and their enablers.
Executive Order 14157: Marks a policy transformation by treating cartels and TCOs as national security threats on par with foreign terrorist organizations. It mandates interagency coordination and authorizes sanctions, criminal prosecutions, asset forfeitures, and enhanced border enforcement.
Cartel Designations: On February 20, 2025, the State Department designated eight prominent cartels as both FTOs and Specially Designated Global Terrorists (SDGTs). These designations make it unlawful for U.S. persons to provide material support or resources to these organizations, block all property interests under U.S. jurisdiction, and prohibit most financial and commercial dealings with them.
FinCEN Sanctions: In June 2025, FinCEN invoked the Fentanyl Sanctions Act and Fend OFF Fentanyl Act to label three Mexican financial institutions as “primary money laundering concerns.” The designations bar covered financial institutions from engaging in any transmittals of funds involving these entities, thereby severing their access to the U.S. financial system and increasing scrutiny on counterparties with ties to the same networks.
DOJ Enforcement: The Department of Justice has repeatedly reaffirmed its goal to “achieve the total elimination of cartels and transnational criminal organizations.” Recent prosecutions illustrate the breadth of conduct now being targeted:
- In Texas, federal prosecutors charged individuals with using global front companies and foreign bank accounts to smuggle industrial goods to sanctioned Venezuelan state entities, evading sanctions and laundering millions of dollars through overseas channels.
- In another case, two individuals were indicted for allegedly smuggling tens of millions of dollars in crude oil into the U.S. while providing material support to a designated cartel. Authorities described the operation as a complex network of illicit trade, financial concealment, and terrorism-linked activity — highlighting the DOJ’s willingness to apply counterterrorism laws to economic facilitators of cartel operations.
These actions reflect a more aggressive posture by the U.S. government — one that multinational companies cannot afford to overlook.
Risk Mitigation for Multinational Companies
Multinational companies face risks of potential sanctions and money-laundering violations if they have relationships with parties connected to this cartel or money-laundering activity, including financial institutions that might have such connections. To mitigate these substantial risks, organizations should consider the following:
- Review international banking arrangements - be vigilant about where funds are parked or transferred, especially in high-risk jurisdictions or through accounts that may be exposed to informal value transfer systems or trade-based money laundering typologies.
- Enhanced Screening and Due Diligence: Screen all counterparties, including suppliers, distributors, financial institutions, and intermediaries against SDN, FTO, and SDGT lists. Integrate these checks into onboarding and ongoing monitoring workflows. Perform deep-dive reviews of high-risk third parties and geographies.
- Monitor for Creeping Risk: Reassess long-term relationships for changes in beneficial ownership, geographic scope, or sector focus that may increase exposure to cartel-linked activity.
- Strengthen Transaction Monitoring: Implement controls to flag uncharacteristic financial activity such as cash-heavy payments, opaque remittance details, or transactions routed through high-risk jurisdictions.
- Assess Industry Risks: Cartels and TCOs often target:
- Logistics and transportation firms operating in remote or maritime corridors
- Infrastructure developers interacting with local authorities
- Utility and public service providers with regional monopolies
- Sectors with powerful labor unions and opaque procurement chains
- Contractual Risk Management - Update supplier and partner agreements to include explicit anti-cartel and anti-TCO clauses, audit rights, and termination triggers for compliance breaches.
- Employee Training and Reporting Channels - Train employees and key contractors to identify red flags and report suspicious behavior. Establish secure, anonymous internal reporting channels with appropriate escalation procedures.
- Ensure Executive and Board Oversight - Report cartel/TCO risks to senior leadership and board-level compliance committees. Designate crisis response personnel and prepare protocols for law enforcement coordination, employee safety, and legal response in high-risk regions.
Conclusion
The Trump Administration’s aggressive enforcement strategy against drug cartels and transnational criminal organizations represents a turning point in U.S. policy. Backed by a landmark Executive Order, FTO/SDGT designations, a revitalized sanctions regime, and a whole-of-government commitment to enforcement, including the launch of the DOJ-DHS Trade Fraud Task Force, this campaign presents profound compliance risks for multinational companies.
Companies should act now to identify vulnerabilities, reassess exposure, and strengthen compliance systems to meet this new regulatory environment. Proactive measures — from enhanced due diligence and training to contractual safeguards, trade compliance reviews, and executive oversight — are essential to mitigating exposure.
Thompson Hine LLP is actively advising clients on these developments and stands ready to assist with risk assessments, compliance reviews, and enforcement response planning.
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