July 2, 2024

SHARE |

IntelBrief: Trafficking Fentanyl and Fish: Mexico’s Most Notorious Gang Collaborates with Chinese Organized Criminal Groups

AP Photo/Jamie Ding

The U.S. Department of Justice (DOJ) recently announced an indictment charging Los Angeles-based associates of Mexico’s Sinaloa drug cartel for conspiring with money-laundering networks linked to Chinese underground bankers in the United States. U.S. officials uncovered a complex partnership between the notorious Mexican cartel and the Chinese groups which laundered over $50 million in proceeds from drug trafficking, including in fentanyl, cocaine, and other drugs, according to federal prosecutors.

The five-year investigation resulted in 24 people charged, $5 million in narcotics proceeds confiscated, and the seizure of 302 lbs. of cocaine, 92 lbs. of methamphetamine, and 3,000 ecstasy pills. Chinese and Mexican law enforcement aided in the arrest of two fugitives who fled the U.S. after initial charges were issued last year.

This case highlights the increasing collaboration between Chinese criminal networks and Mexican cartels, a trend that has grown in recent years alongside record levels of legal trade between China and Mexico. A primary method of Chinese organized criminal involvement with the cartels is through money laundering. In addition to tactics such as purchasing cryptocurrency and structuring transactions to avoid federal reporting, Chinese underground bankers launder cartel drug proceeds by providing wealthy Chinese individuals who are living abroad or wishing to invest overseas with large sums of U.S. dollars in exchange for renminbi deposited in a Chinese bank. The latter is a service that is in particularly high demand due to China’s current $50,000 cap on money transfers out of the country.

After taking a commission, the broker helps ensure the renminbi in China returns to the cartel, typically by using it to purchase precursor chemicals for drug production, which are then shipped back to Mexico for use or resale by the cartels. This system allows money to move “faster, cheaper, and at a fraction of what is usually charged [by money laundering organizations],” according to Anne Milgram, the head of U.S. Drug Enforcement Administration (DEA). In this system, dollars stay in the U.S., pesos stay in Mexico, and renminbi stay in China, while communications happen through encrypted communications, such as WeChat, inhibiting standard forms of surveillance.

Although money laundering is a significant area of cooperation between the two groups, Chinese involvement with Mexican cartels extends far beyond this activity. According to U.S. government reports, China has become the primary source of precursor chemicals for the synthetic drugs produced by the cartels, including fentanyl and methamphetamine. Additionally, China supplies essential equipment, such as pill press machines, which are used to compress powder into tablets. Furthermore, cartels and Chinese organized crime groups have increasingly partnered in trafficking poached wildlife and endangered fish, which are in high demand in China and are estimated to generate tens of millions of dollars in profit for the cartels.

The partnership between cartels and Chinese groups has significantly complicated efforts by authorities to trace and seize illicit funds, thereby facilitating the cartels' ability to expand their illegal activities. This collaboration poses a serious threat amid what the DEA has called the “worst drug crisis in U.S. history.” Fentanyl, a deadly synthetic opioid, is primarily sourced from Mexican cartels like the Sinaloa cartel and has resulted in 38,000 deaths in the U.S. in the first half of 2023 alone, according to the DEA. This new alliance could further exacerbate the crisis, increasing addiction rates, escalating drug-related violence, and overwhelming healthcare systems both in the United States and globally.

The expansion of cartels’ illegal activities into areas of Mexico that were previously calm, as well as rivalries between groups in long-violent states, are fueling what many migration experts believe is the largest exodus of Mexican families in modern history. Many families have identified violence, rather than economic factors, as the primary driver in the decision to leave Mexico. 88 percent of Mexicans interviewed in 2023 by a migrant shelter and resource center, Kino Border Initiative, said they were seeking to escape violence according to interviews with 6,710 people. This is in stark contrast to survey data collected by the center in 2017, where 87 percent of the over 7,000 respondents said they were migrating for economic reasons; only 2 percent cited violence.

The proliferation of cyclical narco-violence in Mexico, fueled by illicit activities between the cartels and Chinese criminal groups, will likely translate into higher levels of Mexican nationals attempting to seek asylum in the United States. Further, as immigration reform continues to be stymied in the U.S. Congress, coupled with diminished legal pathways, there will continue to be an increased demand for human smugglers. Human smuggling generates millions of dollars in profits for organized criminal groups, including Mexico’s most violent drug cartels such as the Sinaloa cartel.

Amid the interconnected crises, the United States is determined to take decisive action on cartels’ illicit activities; however, it faces significant obstacles, partly due to insufficient cooperation from Mexico and China. Although relations with China have improved, as cooperation on drug issues resumed in November 2023 after a hiatus between August 2022 and November 2023, the effectiveness of this renewed partnership remains to be seen.

As for Mexico, cooperation on drug issues was highly limited under President Andrés Manuel López Obrador’s (also known as AMLO) administration, which pursued a less punitive approach to cracking down on drugs, known as “hugs, not bullets.” Although Mexico’s new president, Claudia Sheinbaum, has not yet fully clarified her strategy for dealing with the cartels, she has previously stated that she plans to continue López Obrador’s legacy. Moreover, she has supported AMLO’s approach to cartel violence in the past. This indicates that Mexico’s response to the cartels will not dramatically shift, rendering the future of cooperation between Mexico and the U.S. on this issue uncertain. Moreover, as political rhetoric heats up among members of the U.S. Congress on the issue of cartels and drug trafficking, particularly in a contentious presidential election cycle, U.S. policy on Mexico and drug trafficking may potentially evolve to more punitive methods.