Treasury Department Sanctions 3 in Alleged China-Linked Cartel Money Laundering Scheme

Ryan Morgan
By Ryan Morgan
July 1, 2024US News
Treasury Department Sanctions 3 in Alleged China-Linked Cartel Money Laundering Scheme
The seal of the U.S. Treasury Department on the U.S. Treasury Department building is seen in Washington on Jan. 19, 2023, following an announcement by the U.S. Treasury that it had begun taking measures Thursday to prevent a default on government debt, as Congress heads towards a high-stakes clash between Democrats and Republicans over raising the borrowing limit. (Saul Loeb/AFP via Getty Images)

The U.S. Treasury Department has sanctioned one Mexican resident and two Chinese residents suspected of laundering drug trafficking proceeds for the Sinaloa Cartel.

The Treasury Department, on July 1, named Mexico-based Diego Acosta Ovalle and China-based Tong Peiji and He Jiaxuan as suspected Cartel moneymen. The Treasury Department sanctioned the trio, in accordance with a December 2021 executive order, authorizing sanctions on suspected participants in the global illicit drug trade.

According to the Treasury Department’s Office of Foreign Assets Control, Mr. Ovalle helped the Sinaloa Cartel collect and hide their drug trafficking profits, and moved those proceeds along to cartel associates.

The Treasury Department alleged the cartel associates worked with the two Chinese nationals, who were members of a U.S.-based Chinese Money Laundering Organization (CMLO).

“In at least one instance, Tong Peiji traveled to Mexico to meet with Sinaloa Cartel members to obtain contracts to launder drug trafficking proceeds,” the Treasury Department said. “Tong Peiji also arranged to purchase cryptocurrency that could be provided to Sinaloa Cartel accounts. Tong Peiji and He Jiaxuan worked within the CMLO to deliver drug trafficking proceeds to individuals in need of U.S. currency.”

The U.S. Attorney’s Office for the Central District of California investigated the underlying trafficking allegations, along with the U.S. Drug Enforcement Administration, the Internal Revenue Service–Criminal Investigations, Homeland Security Investigations, the Federal Bureau of Investigation, and various local police departments in California.

The sanctions allow the U.S. government to seize any property or interests that three sanctioned individuals directly hold in the United States, or that are under the control of a U.S.-based person. Any entities in which the three sanctioned individuals either directly or indirectly hold a 50 percent or higher stake are blocked. The Treasury sanctions also generally bar any transactions between U.S. persons and the three sanctioned individuals, or transactions occurring within the United States that involve these individuals.

“Combatting the threat posed by Money Laundering Organizations in China is a key priority of the Treasury Department, and today we are taking action to cut off the financial flows of major money launderers who are powering the trafficking of fentanyl and other illicit drugs to the United States,” said Deputy Treasury Secretary Wally Adeyemo following the Monday sanctions action.

Mr. Ovalle, Mr. Tong, and Mr. He were among two dozen criminal defendants the U.S. Department of Justice named in a 10-count superseding indictment. Federal investigators alleged a Chinese-run “underground banking” network helped launder more than $50 million in drug trafficking proceds between October 2019 to October 2023.

The Chinese regime generally restricts those who live, work, or invest in China from transferring more than about $50,000 worth of their money out of the country. Prosecutors allege that  Chinese underground banking networks act as brokers by operating bank accounts inside and outside of China. These brokers agree to take funds in China from Chinese clientele and in turn release equivalent funds from their accounts outside of China on behalf of those Chinese clients, allowing those Chinese clients to circumvent the Chinese laws on foreign money transfers. The cartels supply the brokers with U.S. dollars they obtained in their illicit trade; a source of funds outside of China that can satisfy the needs of the broker’s clients within China. These brokers, in turn, provide a use for cartel dollars that conceals their illicit origins while providing the cartels with credit they can more readily use.

The U.S. government is increasingly pointing to China as a facilitator of drug trafficking networks operating across the U.S.-Mexico border.

According to a 2019 assessment by the U.S. International Trade Commission, about 97 percent of inbound shipments of high-purity fentanyl between 2016 and 2017 originated in China.

In May, the Justice Department arrested Li Pei Tan, of Buford, Georgia, and Chaojie Chen, of China, in connection with another alleged money laundering scheme on behalf of the Sinaloa and Jalisco cartels.

From The Epoch Times