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US Banks Handle $312B in Chinese Drug Money, But Crypto Takes the Heat

FinCEN data shows US banks processed $312B in Chinese-linked illicit funds, while crypto faces tougher scrutiny despite representing less than 1% of global laundering.

by Yashika Gupta
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US Banks

While regulators continue to frame cryptocurrency as the main channel for money laundering, new data from the US Treasury’s Financial Crimes Enforcement Network (FinCEN) reveals that traditional banks are moving hundreds of billions of dollars in illicit funds linked to Chinese criminal networks. The findings highlight a double standard: banks process far larger amounts of suspicious money, yet crypto remains the primary regulatory target.

$312 Billion Laundered Through US Banks

Between January 2020 and December 2024, US financial institutions processed $312 billion in suspicious transactions tied to Chinese money laundering groups. FinCEN’s analysis of 137,153 Bank Secrecy Act reports shows that banks alone accounted for $246 billion of the flow, while money service businesses moved $42 billion and securities firms $23 billion.

On average, the annual suspicious flow through American banks linked to Chinese laundering operations reached $62 billion. These networks are not confined to drug trafficking, they stretch into human trafficking, healthcare fraud, and high-value real estate transactions.

For example, FinCEN flagged $53.7 billion in suspicious property purchases and noted 1,675 reports tied to human trafficking. In New York alone, $766 million flowed through adult day care centres suspected of fraud.

How the Laundering Networks Operate

The networks exploit mismatched financial rules in China and Mexico. Mexican laws restrict large dollar deposits in local banks, while China’s currency controls limit overseas transfers for its citizens. Drug cartels sell illicit US dollars to Chinese nationals eager to move wealth abroad. This creates a mutually beneficial loop that launders cash through both sides of the border.

Criminal groups have also perfected the art of deception. They often use counterfeit Chinese passports to open accounts, while money mules list occupations such as “student” or “housewife” to mask suspiciously large transactions. Bank insiders are also recruited to facilitate or overlook irregular activity.

A Long History of Banking Scandals

FinCEN’s findings add to a long record of banks enabling large-scale laundering operations.

  • Wachovia Bank laundered $350 billion for Mexican cartels between 2007 and 2010, paying just $160 million in penalties.

  • Danske Bank moved $228 billion in Russian funds from 2007 to 2015 despite repeated internal warnings.

  • HSBC was fined $1.9 billion in 2012 after allowing cartels to funnel hundreds of millions using tailor-made cash deposit boxes.

  • TD Bank agreed to pay over $3 billion after prosecutors uncovered $470 million laundered through Chinese-linked accounts in New York and New Jersey.

Historical scandals also include the 1MDB case, where over $1 billion was siphoned through banks into luxury assets, and the collapse of BCCI in 1991, which had laundered billions for cartels and corrupt regimes.

Despite these massive breaches, most penalties have been financial slap-on-the-wrist settlements, far lighter than the systemic compliance crackdowns faced by the crypto industry.

Crypto Still Under Fire

In contrast, blockchain-based transactions represent a small slice of global money laundering. According to Chainalysis and TRM Labs, illicit crypto activity accounts for less than 1% of total laundering worldwide. Over five years, the figure stands at around $189 billion, compared to over $2 trillion annually through banks.

Source: Chainalysis

Source: Chainalysis

Yet regulators remain laser-focused on digital assets. In 2024, French authorities launched investigations into Binance, while Australia’s AUSTRAC ordered Binance to appoint an external auditor within 28 days over compliance concerns. European regulators are reviewing cases involving OKX after alleged laundering of $100 million.

Meanwhile, AUSTRAC has intensified scrutiny of remittance providers, cancelling nine and investigating dozens more.

US Senator Elizabeth Warren has repeatedly argued for stricter rules, claiming criminals “increasingly turn to cryptocurrency.” But FinCEN’s latest data clearly shows that the bulk of laundering still flows through traditional banks, not crypto.

The Double Standard in Regulation

FinCEN’s analysis underscores a key point: while cryptocurrencies face aggressive regulatory crackdowns, traditional banks continue to channel far greater volumes of illicit funds with comparatively minor penalties.

In 2024, crypto-related illicit transactions totalled $51.3 billion, just a fraction of the $312 billion handled by US banks in suspicious Chinese-linked activity alone.

The evidence suggests that regulators are holding crypto to a higher standard, focusing enforcement on an industry still in its early stages, while established financial institutions receive lighter consequences for far more damaging misconduct.

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