Marijuana and Mexican cartels: Inside the stunning rise of Chinese money launderers (2024)

Facing little risk of prosecution, Chinese groups began taking over the marijuana industry from Mexican cartels that had shifted to higher-profit hard drugs, such as heroin and fentanyl. Chinese-run marijuana grows have been identified in 23 states, according to the DEA.

The Chinese use the drug proceeds to fund other criminal activities, including human trafficking, the DEA said in a report released in May. Four Chinese nationals killed execution-style at a marijuana farm in Oklahoma in 2022 were trafficking victims, authorities said.

Since 2021, Oklahoma has emerged as one of the hotbeds of production due in part to its relaxed medical marijuana laws and vast tracts of affordable land.

Local and state authorities have shut down over 3,000 marijuana farms with an estimated 80% to 90% of them linked to Chinese organized crime rings, according to the Oklahoma Bureau of Narcotics. Last year, two Chinese nationals were convicted in federal court of trafficking over 27 tons of black market marijuana from an Oklahoma grow operation using vehicles disguised as Amazon delivery vans.

Chinese marijuana producers have more recently set up in Maine. Since January, more than 40 illegal grow operations with ties to Chinese organized crime have been shut down across the state. But nearly 100 likely remain up and running, according to federal authorities.

The retired DEA agents said the turn away from marijuana prosecutions deprived them of a crucial tool in degrading the Chinese criminal networks. “The marijuana side is an opportunity we’re not taking advantage of,” said Urben, who is now a managing partner at the global investigations firm Nardello & Co.

In an interview, Sen. Susan Collins, R-Maine, said she’s convinced that the Chinese government is connected to the criminal activity in her state.

“There is so much control by China over criminal organizations that to me it defies belief to think that the Chinese government is not involved,” she added.

In June, FBI Director Christopher Wray disclosed in Senate testimony that the agency has not found direct ties between the marijuana grows and the Chinese government itself, but it continues to investigate. Around the same time, the bipartisan House committee on the Chinese Communist Party released a report that found that the Chinese government subsidizes the production of illegal narcotics for export to the U.S.

Rep. John Moolenaar, R-Mich., chairman of the bipartisan House committee on the Chinese Communist Party, also blamed the Chinese government.

“Chinese money launderers threaten our security because the Chinese Communist Party has decided so,” Moolenaar said in a statement to NBC News.

But China experts like Wilder, the ex-CIA officer, hold a different view.

Chinese Communist Party leaders in Beijing don’t direct the actions of criminal groups operating overseas, he said. But some party officials do have relationships with criminal networks and protect those who line their pockets or otherwise serve their interests.

“It’s not centrally directed,” said Wilder, who served as the CIA’s deputy assistant director for East Asia and the Pacific from 2015 to 2016. “This is about Chinese corruption.”

Still, he said it’s critical that the CIA focuses on finding out whether any of the illicit money is being used to undermine the U.S.

“They need to be using their sources of information, their clandestine networks, to find out the answer,” he said.

Chinese Embassy spokesperson Liu Pengyu said that the Chinese government has been cooperating with U.S. drug-related anti-money laundering efforts and that “important progress” has been made recently. He said that Beijing has “always asked overseas Chinese citizens to abide by local laws and regulations and not engage in any illegal activities.”

U.S. officials have long called out China for a lack of cooperation in curtailing the drug trade, but there has been a recent exception.

‘An incredible own goal’

In June, federal prosecutors in California said 24 people, including nine Chinese nationals, had been indicted on charges of helping the Sinaloa cartel launder $50 million in drug proceeds. One of them, Peiji Tong, traveled from the U.S. to Mexico in January 2021 with a Mexican associate to strike a deal with the Sinaloa cartel, prosecutors said.

Tong later fled the U.S. but was arrested by Chinese authorities.

The California indictment followed recent Chinese money laundering cases brought by federal prosecutors in states like Virginia, Massachusetts, Arkansas and North Carolina. And last month, the Treasury Department sanctioned Tong and another member of the California money laundering network.

But far more needs to be done, according to the former DEA agents, ex-CIA officers and congressional officials.

“It is an incredible own-goal that as our chief adversary’s economy continues to flail, we are continuing to allow Chinese money laundering in the U.S. that is pumping millions of dollars into the Chinese economy and fueling death and addiction of our own citizens at the same time,” a congressional aide said.

A DEA spokesperson said that over the past three years the agency has shifted to a “network wide approach” to combating the cartels flooding the country with fentanyl.

“This means attacking every part of the supply chain,” the spokesperson said. “Today a majority of DEA investigations involving illicit finance involve Chinese [money laundering organizations].”

The DEA has made bulk cash seizures tied to these groups in at least 20 states, according to former agents.

But the Chinese networks are particularly difficult to penetrate due to a lack of Mandarin speakers in federal law enforcement agencies and the opaque nature of WeChat, the encrypted messaging platform commonly used by Chinese networks to move drug proceeds.

Unlike traditional phone lines, U.S. authorities are unable to subpoena the Chinese platform in order to monitor chains of communication. Instead they must rely on undercover techniques that require more time and expertise.

“It’s like wearing a blindfold,” said Bodner, the former DEA agent. “You don’t know what’s happening, and you’re guessing a lot.”

A spokesperson for WeChat’s parent company, Tencent, said it “takes the safety of our users very seriously.”

“All users must abide by our Acceptable Use Policy, which prohibits the sale or distribution of certain items where illegal [such as drugs],” the spokesperson added. “When made aware of a violation of our policies, we investigate and take action, up to and including removing users and engaging with the appropriate authorities.”

The ex-DEA agents said they believe it’s possible to dismantle the Chinese money laundering networks. But doing so would require the kind of methodical, collaborative, and intensive approach that the federal government has thus far yet to embrace.

“It’s just like Italian organized crime from 30 years ago,” said Urben, who led undercover financial investigations into Italian organized crime groups in New York in the 1980s and 1990s.

“They had to arrest low level guys to work their way up. They didn’t get John Gotti the first time,” he said, adding, “This could all be really resolved in many ways, if we had the political and economic will, and we don’t.”