According to a May 2025 report from TRM Labs, China’s underground banking network has become important for the operation of organized crime groups around the world.
These networks, also known as “Fei Qian” or flying money, manipulate shadows and functions outside traditional banking regulations, thus promoting a range of illegal activities, from drug trafficking to cybercrime.
Coexistence between global criminal networks and Chinese underground banks
According to a TRM Labs report, there is a symbiotic relationship between Chinese underground banks and organized crime groups around the world, operating beyond regulatory oversight.
These networks are known to use informal value transfer systems such as “mirror exchanges” to move funds across borders. This will avoid triggering AML alarms in regulated banking systems.
This network allows US brokers to collect cash from drug cartels and provide comparable value in China. Except for cross-border wire transfers, often through cryptocurrency or trade-based money laundering (TBML).
In this way, cartels are able to repay illegal income, and wealthy Chinese clients interested in capital flight avoid China’s strict capital controls and create mutually beneficial partnerships.
According to TRM Labs, the reach of these networks is now expanding globally, allowing them to serve customers of diverse criminal organizations, from Mexican cartels to North Korean hackers.
For example, the cartel reportedly relies on Chinese underground bankers to wash their drug income, as seen in the Los Angeles-based ring.
Similarly, North Korean hackers rely on Chinese over-the-counter (OTC) brokers to convert stolen digital assets into Fiat currency or goods, avoiding global sanctions.
Symbiotic ecosystems thrive in the ability of underground banks to act as a bridge between the cash-heavy criminal underworld and formal economies. It relies on encrypted communications platforms such as WeChat and Telegram, leveraging regulatory gaps in jurisdictions with weak surveillance to ensure illegal funds remain obscure.
Financial pipeline for drug trafficking
One particularly surprising thing about China’s underground banking network is that their capabilities have allowed them to evolve into a shadowy financial pipeline that will boost illegal activities, particularly lucrative drug trafficking between the US and China.
The TRM report argues that systems operating outside of regulated channels allow cartels like Sinaloa to wash hundreds of millions of yen a year, and Chinese brokers can benefit from small committees, usually 1-2%.
The increase in Crypto adoption has revolutionized this pipeline as these groups can create faster, larger, and more anonymous transactions. For example, TRM Labs reported that a washing machine linked to the US Sinaloa cartel deposited drug cash into a crypto ATM or exchange and converted it to Bitcoin for transfer to a Chinese controlled wallet.
These funds will be used to purchase precursor chemicals for fentanyl production or other commodities, which will be reinvested in the drug trade. The pipeline not only encourages an opioid crisis, but also supports a broader illegal economy, such as North Korea’s avoidance of sanctions and Russia’s military supply chain.
Disrupting the pipeline requires advanced blockchain analysis, international cooperation, and proactive measures, such as targeting key nodes such as OTC brokers.
There have been successful cases such as the Binance Freeze account linked to North Korean washing machines in 2022, but the constant innovation in the network means law enforcement must maintain toe and make the work even better.
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