Money Laundering in Latin America: The Chinese Connection

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The Financial Times documentary Dirty Money, Cartels, and Underground Banks exposes the global growth of money laundering operations led by clandestine Chinese networks, including their impact in Latin America. These networks provide financial services to criminal organizations, facilitating money laundering through a trust-based underground banking system using methods like “mirror transfers,” similar to the Middle Eastern hawala system. Despite high fees, these networks attract drug traffickers and mafias due to their ability to move money internationally without physical transfers.

The effectiveness of these networks lies in the Chinese concept of guanxi, which governs trust-based relationships within the Chinese emigrant community. This makes it difficult for law enforcement to infiltrate, especially as many authorities lack understanding of Chinese culture and financial models. Latin American criminal organizations exploit this gap to collaborate with Chinese networks, enabling European mafias to pay regional drug traffickers and Chinese entrepreneurs to access funds abroad.

Recent examples include the convictions of Chinese operators like Xianbing Gan and Xizhi Li, who laundered millions for Mexican cartels, and the discovery of laundering networks in Ecuador, Brazil, and Argentina. In Brazil, shell companies used by groups like the Primeiro Comando da Capital (PCC) were dismantled after laundering money through illegal Chinese banks. These networks also employ methods such as blending illicit profits with legitimate income and using cryptocurrencies to obscure the origin of funds. Cryptocurrencies are especially popular due to their global reach and difficulty to trace.

Corruption is another factor facilitating money laundering. Investigations reveal how Chinese companies use bribes to secure contracts for infrastructure projects in countries like Ecuador, Bolivia, Venezuela, and Brazil. This “Angola model” combines natural resources with infrastructure investments, often accompanied by corrupt practices. In Ecuador, for instance, a purported travel agency funneled illicit funds from public contracts to bribe local officials.

Finally, experts like John Cassara warn that Chinese initiatives, including the Belt and Road Initiative (BRI), export corrupt practices under the guise of economic development, hindering growth in Latin America. These illicit activities pose a threat to the region’s economic stability and security as Chinese investments in strategic resources continue to be accompanied by corruption and opaque practices.

Main Source:

Corrupción y lavado de dinero: los riesgos de las operaciones financieras chinas en Latinoamérica – Diálogo Américas

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