U.S. Treasury Cracks Down on Chinese Fentanyl Traffickers

The U.S. Treasury Department on Wednesday announced a crackdown on the “Chinese drug kingpins fueling America’s deadly opioid crisis.”

The individuals and organizations designated for Treasury action deal in powerful synthetic opioids like fentanyl and carfentanil, which are often mixed into other street drugs without the knowledge of customers, resulting in countless deaths by overdose.

The Treasury Department’s Office of Foreign Assets Control (OFAC) named Chinese national Zheng Fujing, his father Zheng Guanghua, their drug trafficking organization, and a company they control called Qinsheng Pharmaceutical. Another individual named Yan Xiaobing was also named as a “significant foreign narcotics trafficker.”

The Financial Crimes Enforcement Network (FinCEN) of the Treasury Department issued an advisory to financial institutions warning them to be on guard for the schemes employed by fentanyl kingpins to move their money around.

“We are making the financial sector aware of tactics and typologies behind illicit schemes to launder the proceeds of these fatal drug sales, including transactions using digital currency and foreign bank accounts,” said FinCEN Director Kenneth A. Blanco.

“Financial institutions must be on alert to red flags and other indicators of the complex schemes fentanyl traffickers are employing so that financial institutions can report and share relevant information with law enforcement, and ultimately help save lives,” Blanco said.

Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker said the activities of these Chinese drug kingpins are “directly contributing to the crisis of opioid addiction, overdoses, and death in the United States.”

“Zheng and Yan have shipped hundreds of packages of synthetic opioids to the U.S., targeting customers through online advertising and sales, and using commercial mail carriers to smuggle their drugs into the United States,” Mandelker said.

The Treasury statement described the Zheng Drug Trafficking Organization (DTO) as using aggressive online marketing to move its products, which include phony cancer drugs:

Zheng created and maintained numerous websites to advertise and sell illegal drugs in more than 35 languages. The Zheng DTO touted its ability to create custom-ordered drugs and avoid detection from customs and law enforcement officials when shipping the drugs through express mail and the U.S. Postal Service.  

The Zheng DTO also used its chemical expertise to create analogues of drugs with slightly different chemical structures but the same or even more potent effect. The Zheng DTO even agreed to manufacture adulterated cancer medication, creating counterfeit pills that replaced the active cancer-fighting ingredient with dangerous synthetic drugs.  

The Zheng DTO laundered its drug proceeds in part by using digital currency such as bitcoin, transmitted drug proceeds into and out of bank accounts in China and Hong Kong, and bypassed currency restrictions and reporting requirements.

Yan’s trafficking operation also uses cryptocurrency to handle its finances, marketing directly to American drug users in several cities. Yan keeps a close eye on legislation and law enforcement in both the U.S. and China, modifying his products occasionally to evade detection and seizure.

Cryptocurrency news website CoinDesk noted Wednesday’s action was “the second time OFAC has sanctioned digital currency addresses specifically, having last done so in November 2018 when a pair of Iranian nationals were added to the Specially Designated Nationals list.” Twelve specific blockchain addresses associated with the Zhengs and Yan were provided with the alert from the Treasury Department. 

The South China Morning Post saw the Treasury action as part of Washington’s effort to “increase pressure on Beijing to limit the flow of Chinese-produced fentanyl into the U.S.”:

Beijing said it would designate all fentanyl derivatives as illegal starting in May, following a pledge made by President Xi Jinping to US President Donald Trump as part of trade negotiations in November.

Trump recently accused Xi of reneging on that commitment, saying on Twitter, “my friend President Xi said that he would stop the sale of Fentanyl to the United States – this never happened, and many Americans continue to die!”

Beijing shot back via its state media organs, saying the government had made “unprecedented efforts” to address the fentanyl problem and that the US “only [had] itself to blame” for the crisis.

The SCMP reported the White House Office of National Drug Control Policy supported the Treasury action by issuing a series of advisories that teach financial institutions how to detect fentanyl-related transactions and show web providers how to spot online marketing campaigns created by traffickers. Some of these web ads include offers to customize drug mixtures to order and promises to ship free replacements if a delivery is seized by customs agents.