Reported by the Economist

(Summary featured below. To read full report, go to: https://www.economist.com/international/2025/11/20/how-chinese-underground-banks-became-the-worlds-biggest-money-launderers)

How Chinese Underground Banks Quietly Took Over Global Money Laundering

Chinese underground banking networks have rapidly become the world’s most powerful money-laundering engines, eclipsing older criminal systems with unmatched scale, speed, and efficiency. Once known for dominating legal industries like steel and electric vehicles, Chinese actors have now built a parallel financial universe that moves billions in drug money, scam proceeds, and even cryptocurrency stolen by North Korean hackers. U.S. officials estimate that around $154 billion in illicit funds flows through China each year—largely tied to Mexican cartel drug sales in the United States—illustrating the networks’ extraordinary reach and dominance.

Their competitive edge comes from a combination of ultra-low fees, innovative laundering techniques, and the ability to operate without exposing clients to cartel violence. Traditional Latin American laundering systems once charged 7–10% and carried high risks. Chinese networks, by contrast, charge just 1–2% and rely on digital coordination, encrypted messaging, and decentralized brokers. Their hallmark technique, the “mirror transaction,” allows drug dollars in the U.S. to be instantly matched with yuan in China or euros in Europe—without any money crossing borders or creating a traceable trail. Capital-control pressures inside China, paired with demand from wealthy Chinese seeking to move money abroad, have only accelerated the growth of these underground markets.

As the networks expand, they’ve proven effective partners for other criminal ecosystems. When North Korean hackers executed the largest crypto heist ever—stealing roughly $1.5 billion—Chinese underground bankers helped them launder nearly $100 million per day, breaking the funds into smaller transactions and blending them with legitimate cryptocurrency flows. Meanwhile, billions generated from Southeast Asia’s massive online scam syndicates—some earning $30 million a day—flow through Chinese-run laundering structures that use crypto mining, online gambling sites, shell companies, fake invoices, and even casinos to disguise criminal proceeds as legitimate commerce.

The ecosystem thrives by embedding illicit activity into legitimate-seeming platforms. Businesses like Prince Group and Huione Guarantee allegedly blended real estate deals, car sales, and e-commerce with large-scale fraud, crypto laundering, and pig-butchering schemes. These hybrid operations became “one-stop shops” where criminals could buy services, cash out stolen crypto, or move funds globally with minimal scrutiny. In one case, U.S. prosecutors say a Chinese-Cambodian tycoon amassed 127,000 bitcoin—worth $15 billion—through massive fraud operations cleaned by underground networks. The U.S. Treasury has since sanctioned Huione Group for acting as a key laundering hub for North Korean cybercrime and global scams.

Even the final step—pushing cleaned cash back into the legal banking system—relies on real people. Chinese networks routinely recruit students, low-wage workers, and migrants as “money mules,” encouraging them to open bank accounts or move funds for quick cash. Many, like a young Singaporean dishwasher who unknowingly facilitated hundreds of thousands of dollars in transactions, face criminal charges while higher-level operators remain hidden. Similar mule recruitment and bank-employee corruption schemes have surfaced in the U.K., the U.S., and across Asia.

Governments are responding with sanctions, prosecutions, and major investigations. But without cooperation from China—whose political tensions with Western nations remain high—authorities warn they are fighting global Chinese laundering networks in a perpetual game of whack-a-mole.