Reported by Patricia Kowsmann, Dylan Tokar and Brian Spegele

(Summary version featured below)

On an October morning in 2022, a white pickup truck pulled into the parking lot of a Global Fresh Market, stopping beside a blue Maserati. Within moments, a man handed over a large black bag, allegedly filled with $300,000 in cash. The exchange, closely watched by a U.S. government task force, was part of a sophisticated money-laundering scheme that officials say is fueling America’s fentanyl crisis. At the heart of the operation are Chinese money brokers who have become key intermediaries for Mexican drug cartels, facilitating the movement of illicit drug proceeds through a shadowy financial network.

These Chinese brokers have long operated within an underground banking system that serves China’s diaspora, but their role has expanded as they offer a faster, cheaper alternative for laundering drug money. The process relies on intermediaries, like the woman in the Maserati, who collect profits from U.S.-based fentanyl dealers. The cash is then sold to Chinese nationals looking to move money abroad, bypassing Beijing’s strict capital controls. Officials say this illicit network not only cleanses drug profits but also supplies cartels with the funds needed to sustain their operations.

The investigation into this scheme, dubbed “Operation Fortune Runner,” spanned years and included extensive surveillance. Officers discovered drug money concealed in everyday items, such as a Fruity Pebbles cereal box and a birthday gift bag. Ultimately, prosecutors indicted 24 individuals, accusing them of laundering over $50 million in drug proceeds tied to the Sinaloa cartel. The case underscores the growing challenge facing U.S. officials, as efforts to curb fentanyl trafficking now extend beyond drug supply chains to financial networks that enable their profits to flow seamlessly.

Former President Donald Trump, who has pledged to combat the fentanyl epidemic, has largely focused on restricting the flow of precursor chemicals used to make the drug. His administration imposed tariffs on China, including a new 10% levy earlier this month, in an attempt to pressure Beijing into taking stronger action. However, dismantling the financial web that sustains the trade presents a more complex challenge, as Chinese money-laundering networks continue to thrive under the radar.

Chinese officials, for their part, reject accusations that their nationals play a central role in laundering drug money. In a written response to U.S. inquiries, China’s Foreign Ministry maintained that the roots of the fentanyl crisis lie within America itself. Beijing has pointed to its past cooperation with Washington in cracking down on fentanyl production, while criticizing Trump’s tariffs as counterproductive. “Blaming others will not solve this problem,” the ministry stated, emphasizing that diplomatic pressure alone will not address the crisis.

Meanwhile, fentanyl remains the deadliest drug in the U.S., with law enforcement seizing enough last year to kill every American. The Chinese money-laundering system has proven particularly effective because it offers lower commission rates than traditional methods used by drug cartels. While Colombian money launderers once charged as much as 10% per transaction, Chinese brokers operate on margins as low as 1% to 2%, making them an attractive option for traffickers. The speed and efficiency of this underground financial system have allowed it to become one of the dominant money-laundering methods worldwide.

U.S. authorities have intensified their crackdown on these networks, leading to multiple arrests, including the indictment of Sai Zhang, a suspected ringleader operating in Los Angeles. Court records indicate that Zhang’s network handled millions in illicit funds, working closely with cartels and their U.S.-based operatives. While Zhang has pleaded not guilty, his case highlights the formidable challenge facing law enforcement: an evolving financial ecosystem that continues to fuel the fentanyl trade, bridging criminal enterprises across borders with an efficiency that has proven difficult to disrupt.

Read original version via: https://www.wsj.com/world/china/china-fentanyl-trade-network-9685fde2