China’s shadow bankers: Hidden arteries of global crime

The global fight against organized crime has taken an alarming turn. As revealed in article by Foreign Policy a network of underground Chinese financiers has quietly become a central pillar of the world’s criminal economy. These shadow bankers, long operating beneath regulatory radars, are now the preferred money launderers for major transnational syndicates, from Italian mafias to Latin American cartels.

Recent police investigations in Italy uncovered over €1 billion in criminal proceeds laundered through these covert Chinese networks. What’s most striking is not just the scale of the operations, but the method: a traditional trust-based system known as fei chien, or “flying money.”

This centuries-old mechanism, similar to hawala systems in the Middle East and South Asia, allows money to move internationally without physically crossing borders or leaving behind a conventional paper trail. Instead, brokers located in different parts of the world settle accounts based on mutual trust, often using cryptocurrencies, trade transactions, or other informal balancing tools.

The anonymity and speed this system offers have made it increasingly attractive to criminals, even more so as global surveillance and financial regulations tighten.

Legorano illustrates how these networks are often embedded in tight-knit diaspora communities across the United States, Canada, Europe, and Latin America. Originally used by migrants to send remittances back home, these informal value transfer systems have grown more sophisticated and are now central to the movement of illicit funds.

Experts say that Chinese brokers typically charge very low commissions—sometimes less than two percent—making them more competitive than traditional laundering methods. This low cost, combined with their global reach and discretion, has positioned them as the brokers of choice for a wide range of criminal organizations.

Investigations show that Italian groups like the ‘Ndrangheta have relied on these brokers to transfer millions of euros from Europe to Colombia in exchange for massive shipments of cocaine.

In one case, members of the mafia physically drove €8 million in cash from Calabria to Rome and Naples, where Chinese brokers converted the money and sent it instantly to drug producers in South America. Other operations involved the Sicilian Cosa Nostra and criminal rings in Spain, where a joint Arab-Chinese network laundered more than $21 million through cryptocurrency exchanges.

The pattern extends beyond Europe. In the United States, the connection between these laundering networks and the fentanyl trade has raised red flags at the highest levels. According to the U.S. Treasury’s 2024 National Money Laundering Risk Assessment, Chinese money laundering organizations are now among the most professional and prevalent global actors in the field.

These groups, often decentralized and insular, acquire U.S. dollars from drug traffickers and use informal banking systems to transfer equivalent sums abroad—often to Chinese nationals seeking to circumvent Beijing’s strict currency controls. In this model, dirty cash remains in the U.S., funneled into the banking system via money mules and shell accounts, while criminal groups abroad receive clean currency, often in the form of pesos or other local currencies.

Cases involving banks have already surfaced. TD Bank, for example, paid a $3 billion penalty after it was revealed that Chinese criminal syndicates had bribed staff and used branches in New York and New Jersey to launder fentanyl profits.

While not all financial institutions are directly implicated, experts stress that banks remain a weak point in the global anti-money laundering framework. Federico Varese, a criminologist at the University of Oxford, warns that banks still struggle to detect illicit funds once they enter the formal financial system, especially when those funds are broken into smaller amounts and distributed across numerous accounts.

Complicating enforcement efforts is China’s vast economic footprint. As Vanda Felbab-Brown of the Brookings Institution notes, money movements linked to China are harder to question due to the country’s extensive trade relationships.

Unlike smaller nations, Chinese businesses have plausible reasons to move money almost anywhere in the world, making trade-based laundering exceptionally difficult to detect. This advantage allows criminal brokers to operate behind a veil of legitimate commerce.

Governments are beginning to respond. The United States and China have pledged to cooperate more closely, particularly around money laundering linked to fentanyl trafficking. Under the Biden administration, joint efforts were initiated to improve coordination.

Meanwhile, U.S. President Donald Trump, on the first day of his second term, designated international drug cartels and their financial enablers as terrorist organizations—a move that opens the door to more aggressive legal tools and asset seizures.

Some experts, like Elaine Dezenski of the Foundation for Defense of Democracies, believe that cutting off financial lifelines to these networks may be more effective than trying to intercept drugs themselves.

Still, dismantling these shadow systems will not be easy. Their global nature, deep ties to diaspora communities, and reliance on trust rather than formal infrastructure make them uniquely resilient.

Yet as Legorano’s reporting makes clear, ignoring them is no longer an option. These networks have become embedded in the very structure of the global criminal economy, silently moving billions and empowering the operations that fuel violence, addiction, and instability worldwide.

Confronting this threat will require sustained international cooperation, smarter regulation, and, perhaps most critically, a clear understanding that in the world of financial crime, what can’t be seen can often do the most damage.

By Aghakazim Guliyev