Hearing Wrap Up: Chinese Criminal Rings Provide Financial Services and Materials Used by Cartels for Fentanyl and Illicit Drug Trafficking; Biden Administration Must Do More

WASHINGTON—The Subcommittee on Health Care and Financial Services held a hearing titled, “China in Our Backyard: How Chinese Money Laundering Organizations Enrich the Cartels.” Subcommittee members discussed with witnesses how Chinese Money Laundering Organizations (MLOs) have taken a central role in washing illicit funds stemming from cartels’ production and sale of fentanyl and other illegal narcotics in addition to providing cartels with the necessary precursor elements to produce fentanyl coming across the U.S. southern border. Subcommittee members also examined measures that Congress can take the crack down on Chinese MLOs and why the Biden Administration has not exhausted its tools in combating these illicit activities through sanctions and other measures.

Key Takeaways:

Chinese Money Laundering Organizations (MLOs) have attained near total control of the laundering operations for Latin American cartels’ illicit funds raised through their sales of fentanyl, cocaine, heroin, and other narcotics that poison and kill tens of thousands of Americans annually.

• Christopher Urben— Former Assistant Special Agent in Charge of Special Operations Division at the U.S. Drug Enforcement Administration—explained how Chinese criminal organizations have been enriched by their involvement in cartel operations and how their involvement has led to greater production in fentanyl coming across the border: “Money is the lifeblood of the cartels, and the methods that Chinese criminal organizations are using enriched them and enabled them to traffic even more fentanyl and other deadly drugs into the United States. Moreover, this was adversely affecting the integrity of our nation’s financial system.”

U.S. Customs and Border Patrol recognizes China as the principal source country of illicit fentanyl and fentanyl-related compounds, making them a key component in the fentanyl crisis currently plaguing communities across the U.S.

The Biden Administration has the tools to dissolve this network but it has done little to target Chinese MLOs.

• Anthony Ruggiero— Senior Director and Senior Fellow at the Foundation for Defense of Democracies—laid out how the Biden Administration has been hesitant to confront the Chinese financial system head on regarding their involvement with cartel operations: “The administration’s efforts and the April White House press releases are commendable, but they had a glaring omission: not a single mention of China and the role of Chinese individuals, companies, and banks in financing the drugs that are killing Americans. The administration must not shy away from calling out Beijing’s role…While Chinese banks fear losing access to the U.S. financial system, the current administration and its successors may avoid strong actions against Chinese banks because they fear the impact on the global economy. But there are precedents showing the U.S. government can target these banks without causing broader disruptions.”

Member Highlights:

Subcommittee Chairwoman Rep. Lisa McClain (R-Mich.) discussed ways that U.S. law enforcement agencies can be better prepared to track and stop the Chinese MLOs operating in and outside of the United States through greater allocation of resources.

Rep. McClain: “And that’s what your recommending is perhaps additional training and resources for additional training? Because unless we choke their money supply off, we’re not fixing this problem. Maybe it’s sanctions, maybe there’s not just one lever that we pull.”

Mr. Urben: “I think all the levers need to be pulled to impose costs on the Chinese Money Laundering Organizations, to make it more difficult for them. So the financial institutions can certainly do this with enhanced due diligence but it’s going to take an increased effort and cooperation with the government to share intelligence and additional enhanced reporting and compliance.”

Rep. Anna Paulina Luna (R-Fla.) discussed with witnesses ways in which Congress can combat Chinese Money Laundering Organizations and keep Americans safe.

Rep. Luna: “What can we do as part of Congress to ensure that we are functioning in a nonpartisan fashion in an effort to really protect the United States from this continued issue with China?”

Mr. Ruggiero: “I think there are ways to increase oversight efforts to make sure the Administration is actually tackling the role of Chinese banks…there’s this fear in going after Chinese banks…what we need is Chinese banks, we need them incentivized to look for these types of transactions and part of that comes from us not being afraid to use the tools, the United States that is, that we have and if the Administration doesn’t have those tools, to come to Congress and ask for them.”

Rep. Paul Gosar (R-Ariz.) confirms with witnesses that in addition to financial services, the Chinese MLOs are providing cartels with the precursor elements needed to produce deadly fentanyl that is coming across the U.S. border killing Americans in droves.

Rep. Gosar: “Where are the chemicals coming from?”

Mr. Ruggiero: “In many instances China.”

Mr. Urben: “Absolutely, they are the primary source of precursor chemicals for the manufacturing of fentanyl.”

CLICK HERE to watch the hearing.