Expert: Mexican Cartels ‘Effectively Using China to Launder Money’

Mexican cartels are “effectively using China to launder money,” a move that may potentially allow Beijing to establish a robust law enforcement presence in Latin America in addition to its current significant military activities in the region, an expert from U.S. Army War College warned this week.

During a panel discussion on transnational organized crime in Latin America hosted by the Hudson Institute on Thursday, Dr. Evan Ellis, a research professor at the U.S. Army War College Strategic Studies Institute, cited a scheme the Drug Enforcement Administration (DEA) exposed about two years ago, explaining:

Mexican cartels were taking the dollars that they earn here in the United States, sending them basically to Colombian functionaries who were working in China. The Colombians would then take the U.S. dollars. In part, they were laundering them through Chinese banks and through also money changing houses in China, but they were also buying stuff in China.

Dr. Ellis described the scheme as “trade-based money laundering,” adding that it involved “importing the goods by pseudo-legitimate organizations into places like Colon in Panama and then distributing it and voila legitimate businesses selling legitimate goods in Latin America effectively using China to launder money of Mexican drug cartels.”

Beijing has expressed a desire to expand law enforcement collaboration with Latin American nations to combat organized crime, the professor revealed, noting:

China understands that it’s a little bit sensitive to do much more than the limited but already significant military activities that they’re doing [in Latin America], but there is a prospect of a greatly expanded Chinese law enforcement collaboration in Latin America. It’s a type of security collaboration. … These types of issues not only create security concerns in the region, but they also create a real opportunity that raises strategic issues for the United States.

The professor noted that Beijing has already cooperated with at least one Latin American country to combat criminal groups with ties to China.

Coupled with its “limited, but significant military activities” in Latin America, China’s ambitions to establish a robust law enforcement presence in the region poses a strategic threat to the United States, suggested Dr. Ellis.

Dr. Ellis noted:

There’s is a huge emerging issue of illicit flows [from China] that follow the licit flows in Latin America, and it’s something in which the training personnel and the contacts of Latin American law enforcement are hugely unprepared to face. But even more worrisome, … guess who is willing to step in the breach to help fill in that gap: [China].

The U.S. military recently warned that China’s plan to expand its ambitious multi-trillion dollar One Belt, One Road (OBOR) project, also known as the Belt and Road Initiative (BRI), poses a threat to the United States.

Adm. Kurt Tidd, the top U.S. commander in charge of military activity in most of Latin America, told lawmakers, “The larger strategic challenge posed by China in this region is not yet a military one. It is an economic one, and a new approach may be required to compete effectively against China’s coordinated efforts in the Americas.”

U.S. military officials often describe China as an American rival.

During the event, Dr. Ellis discussed his new book, Transnational Organized Crime in Latin America and the Caribbean: From Evolving Threats and Responses to Integrated Adaptive Solutions.

He acknowledged that China serves as a “major source” of precursor chemicals linked to synthetic drugs like fentanyl, an opioid that is killing tens of thousands of Americans each year after drug trafficking organizations in Mexico smuggle it.

Echoing U.S. President Donald Trump’s National Security Strategy and federal data, Dr. Ellis said:

The major source, also, of some of the synthetic drugs [like the deadly opioid fentanyl] and their associated chemicals is also China right now working with the [Mexican drug trafficking groups like the] Sinaloa cartel and Jalisco Nueva Generacion

…

You have contraband flows coming into the [Latin American} region [from China] into places like the Port of Colon in Panama. You have weapons flows. You have increasingly trade-based money laundering as well as financial money laundering.

The professor said the drug flows both ways, with Latin American-based narcotics reaching Chinese coastal provinces, such as Shanghai and other regions in Asia, namely Singapore.