FinCEN identified $312B suspicious flows tied to Chinese networks in U.S. banks, overshadowing the far smaller illicit footprint of cryptocurrencies worldwide.
Summary
- FinCEN review revealed $312B laundered through U.S. banks by Chinese networks between 2020 and 2024.
- Methods included shell firms, real estate, trade misinvoicing, money mules, and bank insiders.
- Illicit crypto flows totaled $189B over five years, under 1% of on-chain activity.
- Crypto firms face shutdowns for smaller sums, while banks implicated in hundreds of billions continue operating after fines.
- Evidence shows fiat systems remain the core laundering channels, while crypto is traceable and comparatively minor.
$312B in suspicious flows exposed by FinCEN
On Aug. 28, the U.S. Treasury’s Financial Crimes Enforcement Network released an extensive review of Chinese Money Laundering Networks.
The agency examined 137,153 Bank Secrecy Act reports submitted between January 2020 and December 2024 and documented around $312 billion in suspicious transactions.
Professional laundering rings such as the CMLNs use strategies far more sophisticated than those commonly associated with crypto, relying on shell companies, real estate holdings, and even trusted insiders at banks to disguise illicit funds.
FinCEN’s findings show that these groups often act as financial middlemen for Mexico-based drug cartels where the arrangement is mutually beneficial.
Mexican cartels with excess U.S. dollars from drug sales need to move that cash. Meanwhile, Chinese clients want access to those dollars to bypass Beijing’s strict currency controls.
The CMLNs make that exchange possible, turning cartel proceeds into usable yuan while keeping the flows hidden from regulators.
Trade-based money laundering is a frequent method, where fake invoices and shipments are used to justify transfers across borders.
Networks also rely on armies of money mules to move cash in small amounts, or mirror transactions that replicate transfers across accounts to obscure origins.
In some cases, employees inside banks are either recruited or deliberately placed in positions to keep the illicit pipelines open.
The report also traced specific laundering channels. U.S. financial institutions filed more than 17,000 suspicious activity reports tied to real estate, involving $53.7 billion in suspect funds.
Luxury homes, commercial properties, and land deals became convenient vehicles for absorbing cartel money. Properties were often purchased through shell firms or straw buyers, making it difficult to trace the real owners.
Even everyday businesses were implicated. FinCEN flagged 83 adult and senior care centers in New York that together handled $766 million in questionable transactions, suggesting they may have been used as fronts for laundering schemes.
Beyond drug money, CMLNs were linked to flows from human trafficking, healthcare fraud, elder abuse, and other crimes that generate large volumes of cash.
All of this moved through familiar financial instruments like wire transfers, cashier’s checks, and routine bank accounts.
Crypto laundering narrative vs real numbers
Public debate has long cast crypto as the primary tool for laundering money. Headlines and speeches often imply that Bitcoin (BTC) or exchanges are the go-to channels for criminals.
U.S. Senator Elizabeth Warren, for example, argued earlier this year that “bad actors are also increasingly turning to cryptocurrency to enable money laundering,” calling for tighter restrictions on the industry. The data tells a very different story.
Estimates from the United Nations Office on Drugs and Crime suggest that more than $2 trillion is laundered globally each year, equivalent to roughly 2–5% of global GDP and the vast majority of that total flows through fiat systems.
Meanwhile, Blockchain analytics firm Chainalysis found that illicit crypto transactions added up to about $189 billion over the last five years.
That works out to under $40 billion annually, a small figure beside the trillions in cash-based laundering and even smaller when set against the billions of dollars identified in U.S. banks alone in FinCEN’s recent review.
The proportion of illicit crypto activity is also consistently low. According to Chainanalysis, in 2024, transactions linked to criminal actors represented only 0.14% of total on-chain activity, continuing a trend of staying under 1% in recent years.
Transparency is one reason why crypto has not become the preferred tool for large-scale laundering.
Every transfer on a public blockchain is permanently recorded and visible to anyone. Investigators can often follow digital trails with precision, something not possible with cash.
Law enforcement cases illustrate this clearly. In 2022, the multinational takedown of Hydra, the largest darknet marketplace, relied on tracking crypto flows.
The FBI also traced Bitcoin ransom payments in the Colonial Pipeline attack and recovered $2.3 million by following the coins on-chain.
These examples show how crypto’s visibility can be turned into an investigative advantage. Attempts to use mixers, darknet platforms, or ransomware payments may attract attention precisely because the movements are traceable.
However, in cash-based systems, transactions leave fewer immediate footprints, making them harder to trace or recover.
Crypto firms face probes, banks file SARs and move on
Evidence shows that institutional money laundering through banks is far greater in scale than anything tied to crypto. Yet the enforcement response has not been uniform.
Crypto businesses frequently face rapid shutdowns, sanctions, and even criminal charges when touched by illicit activity, while banks implicated in moving far larger sums often continue operating after paying fines.
In 2022, the U.S. Treasury sanctioned Tornado Cash, alleging it had facilitated more than $7 billion in laundering since 2019. By 2023, two of its developers were arrested and charged with helping to launder over $1 billion, including some flows tied to North Korea.
Around the same time, authorities in the U.S. and Europe dismantled the Bitzlato exchange, a small platform accused of processing $700 million in illicit funds.
Both cases demonstrated how even sub-billion sums in crypto laundering can lead to enforcement actions that erase the businesses involved.
The banking sector has faced very different outcomes. In 2012, HSBC admitted to serious anti-money-laundering failures that enabled Latin American drug cartels to wash at least $881 million in cocaine profits.
The consequence was a $1.9 billion fine and a deferred prosecution agreement. No executives were jailed, and the bank retained its license.
A Senate investigation revealed HSBC had effectively become the “preferred financial institution” for traffickers, but regulators prioritized financial stability over harsher measures.
Other large institutions have faced repeated scrutiny. Deutsche Bank has been penalized multiple times for enabling illicit flows, from Russian mirror trades to weak oversight of high-risk clients.
In 2023, the U.S. Federal Reserve fined it $186 million for failing to resolve years-old compliance problems.
Those lapses included involvement in the Danske Bank scandal, where $276 billion in transactions cleared through Danske’s Estonian branch, much of it suspected to be illicit Russian money.
Despite this history, Deutsche Bank continues to operate, periodically issuing assurances about compliance improvements while absorbing fines as operational costs.
This contrast does not excuse misconduct by crypto firms. Some have facilitated criminal activity knowingly, and enforcement against them is warranted. The issue is consistency.
Traditional banks remain the largest channels for illicit finance yet are allowed to continue operating after documenting their failures. Crypto firms often face a presumption of criminality from the outset.
As things stand, when a bank is caught with weak controls it is treated as having a regulatory lapse, but when a crypto firm faces similar allegations it is treated as a criminal enterprise.
A reset in focus
The debate on illicit finance needs a reset. Evidence is mounting that blockchains are not the preferred playground of launderers. They are, in many ways, a minefield.
The FBI has publicly noted that crypto’s open ledgers make it easier to trace than cash or even traditional bank transfers once a target address is identified.
The traditional banking system tells a different story. Bank secrecy, jurisdictional barriers, and sheer transaction volumes create blind spots that launderers have long exploited.
FinCEN stated that “We will not stand by and allow nefarious actors to launder illicit proceeds through our financial system.” In practice, that is what has occurred for decades, with penalties and periodic crackdowns doing little to disrupt the overall flow.
Hence, the architecture of global money laundering remains anchored in fiat-based systems, and any effort to address the problem meaningfully must begin there.
