The Underworld Podcast - How Chinese Money Launderers Took Over the Narco Underworld

Episode Date: September 24, 2024

When gunmen ambushed a Mexican-Chinese businessman outside his Guatemala City casino in 2016, few outside the DEA paid much attention. But the shootout presaged the downfall of a man who, feds would later say, hadn’t just made a tidy living out of money laundering, but pioneered it. But Xizhi Li, who grew up in the border town of Mexicali, was just one of a new army of Chinese money launderers who, tooled with millennia of underground banking skills, and China’s own economic policies, have become the go-to guys for Latin American cartels looking to wash their dirty cash. And with fentanyl flooding America’s streets, their work is becoming deadlier by the day. Learn more about your ad choices. Visit megaphone.fm/adchoices

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a shabby spot just outside the Guatemalan capital, Guatemala City. It's one of two gambling dens in the city owned since recently by a Chinese-American man who has, almost entirely under the radar, become one of the biggest players in the global narcotics trade. Shishi Li moved from China to Mexico as a boy before diving into the murky world of money laundering. Back in the 90s, when Lee started out in Korea, crime, Colombia and Mexico's biggest gangsters were playing local laundryman commission of up to

18% to turn their ill-gotten gains into legitimate cash. Lee could undercut them wildly, charging just a couple percentage points. And the reason wasn't just his multilingual smooth-talking, his keen eye for numbers, or talent for staying well away from the limelight. No, Lee had something even more potent than all of that, something he'd learned from his Chinese compatriots. a system finesse for well over a thousand years. Feychien, they called it, Flying Money. An informal web of mirror transactions and money mules from Manchuria to Manchester, Mexico City to Macau.

First developed by rice and tea traders to avoid carrying stacks of cash along ancient roads packed with corrupt officials and highwaymen. Until Lee, Flying Money's most notorious proponent had been none other than Sister Pink, New York's snakehead in chief and star of this show's merchandise, who'd made millions ferrying desperate migrants from Fujian into Manhattan's Chinatown district. Lee, however, a lean and flint-eyed triad with a thin John Waters' mustache, has spent his life carving out an empire serving far wealthier clients,

taking the drug money of the world's most dangerous cartels and washing it, and a sea of shell companies, bank accounts, and of course, casinos. He's not alone. Since the early 2000s, Chinese have become the go-to guys for global illicit finance. Baffling authorities and, some say, working hand in hand with Chinese banks and even the Communist Party itself, helping traffickers flood the US with cocaine and, more recently, fentanyl. Suddenly, Lee and his fellow laundromen aren't just a problem for law enforcement. They're a full-blown front line on the diplomatic war between Washington and Beijing.

By this point in 2016, he and a couple associates have raked in up to $30 million, with operations in the U.S., Mexico, Belize, Guatemala and elsewhere. Authorities barely know who he is. Not bad for a poor kitchen staffer from Rube. or Guangdong. But you don't make friends like Lee's without making a whole bunch of enemies too. Perhaps that's why he goes by a ton of different names, like Juan Lee, or Francisco Leightan, or his Ou-Chat aliases,

Super King 99 and JL-O-O-7. They can't keep him safe forever, though. And as Lee parks up at the MGM Golden and his gleaming land rover, gunmen approach and spray over 20 rounds into the vehicle. before darting back into a car and speeding away. A major hit right out in the open. Is this how it ends for a man who has become one of the greatest illegal financiers on earth? Welcome to the underworld podcast.

Hello and welcome to the weekly crime podcast that knows the only thing cooler that a good yarn is a good yarn that is fact-checked and edited. I'm your host Sean Williams in New Zealand. I'm joined today by Danny Gold in New York. City. I think we've been officially at this for four years now, which means we've been podcasters longer than the average NFL player. Is that good or bad?

I do not know. Much of reporting you're in? You know, speaking of NFL players, I've lost every single parlay I've done this season. So listeners, if you're listening, please send me your parlay recommendations for this week's game, but only send me parleyes

that are going to win. I don't want you to send me parlayes that are going to lose. only send me the ones that are going to win. That's a great shout. Yeah, just the ones that are going to win. And if anyone's listening, it does FPL, can you help me stop subbing my players that get loads of points because that is making me one of the worst players officially

in the whole of New Zealand, which is quite embarrassing. Anyway, a quick nod to the Patreon where we have bonuses coming out all the time and the socials where we put out videos and posts and all sorts of stuff like that. But you knew that, and I'll leave that there because some reason, People go crazy when they hear us trying to plug anything on that free podcast, that you literally don't have to do anything for other than press play. You can sign up on Spotify, iTunes, or patreon.com slash an oral podcast. I just interviewed Jake Adelstein of Elstein, actually.

He corrected me on that of Tokyo Vice Fame on his new book and burgeoning friendship with Megan the Stallion. So subscribe and check that out. Yeah, that comment from you definitely just pushed someone on YouTube over into a little shitty comment. But this week's show you're going to get even more value for your no money because it's coming direct from a piece I've been reporting that I think as this is published is going to have come out like one or two days ago for the wire China, which is a great publication. Danny and I did a cover piece for them on Fentanyl a couple years back. And this one is about how Chinese money launderers have essentially taken over the entire

criminal world. So you are going to hear stuff you won't read or hear anywhere else today. And I've even got direct quotes, journalism. Yes. Don't we all love it? I know I do. Editors. And when I say take over the world, like, I really, really mean it. Chinese money launderers have pretty much displaced all others over the past few decades. And a lot of it's to do with something called Fe Chien or Flying Money, which is this informal transfer system that's been going on all the way back to the Tang Dynasty, which I know you all know existed between 618 and 907 AD. That is quite old, isn't it?

If you've ever heard of Hawala, which is a remittance system used across the Middle East, North Africa, South Asia, this is similar. Yeah, that's exactly what it kind of reminds me of. And I think that's been used for money laundering too, or like terrorism financing as well, right? Yeah, and actually the fact that it has been has sort of given flying money, the Chinese version, a bit of a lift. But we'll get to that a bit. And there are some key differences between these two systems. And yeah, one of them is George W. Bush. So we'll get to that, as I said. But I'll dive into the politics of this because it actually is a huge, huge part of the story too. I mean, flying money is partly why the US Treasury Secretary Janet Yellen flew out to Beijing this April with a high profile delegation. Like, this thing is huge. And I'm going to tell you how on the face of it, money laundering and fentanyl could be an area of unique cooperation between Biden and Xi Jinping. But actually, when you get under the hood of the topic, it's kind of kind of the opposite.

You mean like they could do money laundering and fentanyl together? Or like they could pass laws against money laundering and fentanyl together? The latter. But if they did turn their hands of the former, then they would be unstoppable. But yeah, Yellen, Jean, fentanyl and the growing coal war between the US and China. We'll park that for now. First off, let's figure out what flying money actually is. Like I mentioned in the cold open, it's old, very, very old.

In fact, it's around three or four centuries older than the much best. and own Hawala system. And it develops in a Tang dynasty when Chinese merchants begin to produce and trade commodities like rice and tea in huge quantities. So these traders are going to sell their products at market, right? And then they're going to travel sometimes days on end to get to the provincial capital. And something called a memorial offering call here, the traders hand in their coin and inspect to subtract tax returning what's left in the form of a certificate. So this serves a pretty useful purpose, right? Because neither the traders nor the state officials have to trek for miles on the end.

They could kind of back everything up with, I don't know, silver or gold or copper coins. So they don't have to travel around carrying sacks of cash on the backs of mules. And they really don't want to do that journey when every thief and mule jacket from Shanzi to Sishuan knows that they are well off. Fun fact, these certificates are actually believed to be the first paper money on the planet. That is a fun fact. also just invent the phrase mulejacker because I've never heard that before. Yeah, I think I did actually. Could apply it to some editors anyway.

This system ensures when China's traders venture out on the old Silk Road, which, as we know, stretches from Chang'an, which is Montaigian, which is where all those little terracotta dudes are, to Constantinople or Istanbul, where all those little guys who do funny TikToks where they pretend they give an ice cream to a crying little girl are. Fun fact number two, bizarrely by the 19th century, the Western terminus of the Silk Road is actually the English town of Man. Macclesfield, which is home to over 70 silk mills and whose local football team is still called the Silk Men to date. Dude, I am learning so much today already. Yeah, this feels very relevant to our

listenership. Anyway, I had, yeah, I had ancient China highway men and niche football trivia, so that was too much catnip for me to ignore this. Sorry about the pub facts. Anyway, as the Silk Road progresses, brokers emerge in newly formed China towns to settle debts and remit cash from traders back to their friends and family in the homeland. Now this is where flying money really takes off, and its proponents are known as, oh God, Disha Yin Huang, or underground banks,

critiques of my Mandarin and all other hate mail to, well, you know the email address by now. It trusted your entire livelihood to some rando banker in, say, Tash Kent might seem a bit shaky, but Flying Money Security is enforced by a social phenomenon called Guanxi. I'm quoting here from a book by former intelligence agent John Cassara, who writes that Guantzi is, quote, an overarching social system of rules that govern relationships and social behavior. Guanty is the guarantor of both secrecy and the

integrity of the parties to the transaction. Those who violate its prescriptions find themselves as social outcasts. It's not unlike social morays in other parts of the world, I guess, not a million miles from the concept of omerta or silence in the mafia. But I kind of feel like it's not just being a social outcast with those other ones and probably this one, it's also being murdered is what stops them. Yeah, you don't just get it like a T-shirt saying, I'm a silly boy.

I think you might get stabbed in the neck. But for centuries, flying money and the underground banks are the go-to solution for Chinese traders. This is all legal of course at this point. They get another boost when Mao Zedong chases the Chinese nationalists onto Taiwan and christens

the People's Republic of China in 1949. And that's when Western nations blockade the newly communist state and Chinese merchants turn even more to the underground network. And then in 1978, you're really brushing up on the Chinese history here, guys, Chinese premier Deng Xiaoping issues sweeping reforms aimed at growing the Chinese economy, lifting millions out of poverty and helping the PRC join the World Bank. So, Chinese traders are at this point dispatched all over the world, freed up to trade with anyone in all corners of the earth. And piggybacking on this explosion in trade?

Entire armies of traffickers and gangsters, not least among them the 14K triad. A Hong Kong mob formed at the end of the Second World War. Wherever legal trade goes, illegal trade follows. And because there are so many illegal Chinese merchants at this point, well, you do the math. This whole time, Chinese are keen to turn their renminbi or yuan into US dollars, a security or insurance against the shaky Chinese economy. Remember, Chinese economy for the longest time was in the pits, right? In 1980, it's got GDP per capita of just $307.

That is lower than Bangladesh at the time, lower than the Central African Republic, Burkina Faso, even Haiti. And this being in the 80s, with global communism creaking and the Soviet Union about to implode, Chinese are worried the CCP is going to go down a similar path there. So flying money is a great way to get Renminbi out of China via an underground banker as part of a mirror transaction with someone trying to launder their own money. The CCP know this is going on and they try slapping limits on the amount Chinese can exchange to dollars. These are called capital controls.

But right now, in the late 80s and early 90s, they are not very effective. The CCP is wildly, like insanely corrupt, packed full of criminals, and triads and inefficiencies. So nobody's really monitoring this stuff that well. If you're not totally following this so far, don't worry. A, you can just rewind and listen again, but I'm going to explain exactly how it works in a moment. Just bear in mind all these competing interests through the years and how they basically all slot neatly into place supporting this ballooning illicit industry. Oh, and by the way, Renminbi and Yuan, they're both the same currency. It's just that renminbi is the name of the currency.

I think it means like people's money. Well, the yuan is the unit. So it's the same as us Brits saying sterling and pounds. Bro, just use one or the other. We are getting confused. Yeah. You might be saying that a bit more as this show goes on. It's in 1983 that the DEA first connects Chinese underground bankers to the global drug trade,

specifically in Southeast Asia's Golden Triangle, where heroin kingpins like Kun, star of many previous shows are getting wildly rich. Yeah, I mean, we've done like half a dozen episodes, I think, on that dope trade in Southeast Asia, specifically one on Kuntzah, but also on the Wa and others. So if you're a new listener, you can definitely go back and really catch up to speed on what's been going on there the past, I don't know, 75 years. Yeah, and if you are a TV or film producer and you want to chat to a really cool British guy about a pilot, about Kuntzah, then you can ask me directly. Anyway, Chinese money launders are getting wildly rich at this point as well.

And they begin to establish casinos in border towns as a way to wash even more cash. A few years ago, you might remember that I went to one of them in notorious Kings Roman's casino, technically in Lao, but it's kind of Chinese. And these are among the most profitable criminal enterprises on earth. Chinese launderers also wash small amounts of the profits reaped by cocaine traffickers in Colombia, not least Pablo Escobar. To quote, record keeping procedures of the underground banking system are nearly non-existent with coded messages, chits, that's kind of like an IOU, and telephone calls used to transfer money from one country to another, read a 1990 Justice Department dispatch. I mean, chits, telephone calls,

Money? Okay, hold on. Let's slow down a bit now. Because I've already taken you from 618 AD to the end of the Cold War, and I haven't actually explained how this stuff is done. In fact, I'm not going to tell you at all. John Casar is the former intelligence agent because he knows it way better than me, and he's written it in a book, which I read. So you don't get this kind of rampant plagiarism from Kingpin's podcast or whatever, except that you do. So this is how it goes, right? Quote, Wang in Guangdong. which this is not the start of a riddle. Wang in Guangdong province wants to send 200,000 Chinese Renmin B to his brother in New York City. Wang wants to protect his hard-earned money by investing in dollars and in the United States. He uses a series of underground flying money transfers to avoid the PRC's tight capital restrictions. Wang gives the Guangdong flying money broker the renminbi, and in turn he receives a co-eastern country. number. He trusts the broker as they have a familial relationship. There's that old Guanji system kicking in by the way.

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We got Wang in Guangdong, the brother in NYC and the broker in China. He's in Guangdong too, but he could really be anywhere. Let's continue. The flying money broker directs his counterpart in New York, perhaps a member of the same family even, to pay the equivalent in US dollars, approximately 28,000 upon presentation of the code. The code could be transferred in a telephone call or a message contained in an email.

Not many years ago, a playing card or a portion of a currency note with a specific chop, marking, wax seal or other physical sign would be presented to the broker as a sign of authentication. Upon the receipt, the New York Flying Money broker pays Wang's brother in New York City. The Red Min-Bee did not physically leave China, the dollars were already in the US, so similar to Hawala, the system can be described as. as money transfer without money movement. Wang's brother safeguards the $28,000 and following transfer. His capital is now in the United States and authorities are none the wiser. So if that was a little confusing, here you've got four steps.

Step one, Wang wants to send 200,000 renminbi to his bro in NYU. Step two, Wang gives his cash to the flying money underground banker in China and he gets a code in return. Guanxi ensures the broker doesn't run off with his cash. Step three, the broker gets his New York counterpart to pay the same amount in US dollars from his account upon receipt of the code. And step four, the money is paid to Wang's brother. There's a small commission along the way, of course. The money never left China.

It is something called a mirror transaction. And it's almost impossible to track because, A, nothing moved. There's no pay-betrail. It's practically invisible. and B, you're dealing with accounts at state-owned Chinese banks. And those things are about as likely to help you at investigation as Danny is going to do a live show when I'm in Brooklyn next month unless you flood us with requests via the email account that you know about.

So this might all sound a bit like a math lesson. And for that, I apologize, but this stuff is really, it's like insanely important for global organized crime. And it is completely and utterly taken over. John Kasara, for example, reckons there's over a trillion dollars going through flying money transactions each year. And he's not alone. If it is confusing and you do want to launder money, it's actually much easier to wash your cash through like, I don't know, maybe bankrolling a podcast or something that you enjoy. Yeah, that sounds like a really good way. Actually, yeah. Hmm. Okay. I'm going to do a bit of reading after this. Anyway, back to the early 90s. Americans may well know about Hawala networks, like you said earlier, through their use by Arab

terror groups, Palestinians, Lebanese, Iranian regime outposts and so on. But flying money, almost nothing. And this is despite there being over 1.6 million Chinese Americans in the US by this point, and billowing Chinatowns in New York, San Fran and elsewhere. But this all changes at 2am on June 6, 1993, which is when the Golden Venture, 147 foot long cargo ship, runs a ground on a sandbank near New York's JFK airport. Most of its 286 passengers who are undocumented migrants from the Chinese province of Fujian, they survive. But 10 do not, drowning in their attempts to flee the stricken vessel. Now, we've covered this tragedy before. It shocks America and it shines a light on the people smuggling empire of Chengtri Ping, aka Sister Ping, a Fujinese woman who

since the 1980s had ferried over 3,000 Chinese into the US, making up to 40 grand per person. You can go back to that very early episode on the most famous so-called snakehead in history to learn more about how she often committed new arrivals to indentured labor in Chinatown restaurants under threats of violence from a local ethnic Chinese gang. But amid the fallout of the golden venture sinking, which precipitates Ping's downfall, investigators discover that she's not only a snakehead, but a successful underground banker, remitting cash to China for a commission that way undercuts the local branch of the Bank of China, so much so, in fact, that the Bank of China places Mandarin ads in Manhattan Chinatown newspapers,

warning residents that flying money is actually illegal. A Chinatown worker would exchange their weekly cash earnings with Ping in return for a code number. Tell me if you've heard this one before, which the worker would then relay to a relative in China. Ping would then call or fax her contact in China and within a day, a bike courier would arrive at the door of the relative who, if they relayed the code, would receive their money in US dollars. I mean, this is like almost identical to the way it was done over a thousand years ago. Like, it's the same thing. As mentioned before, two mirror transactions have been made.

The money itself hasn't crossed a single border though. There were always people there sending money, said one local of Ping's general store, which also doubled as her cashier. Now, Ping goes on the lamb after the Golden Venture disaster, and she's arrested in Hong Kong after a long, long manhunt in 2000. She's later sentenced to 35 years in a Texas prison, and she dies there, age 65 in 2014. She's by far the highest profile example of a Chinese underground banker in the US, but flying money is still soaring high.

And in 2001, it gets an unlikely boost from the 9-11 terror attacks when Hawala systems come under intense pressure from intelligence agencies keen to dismantle what they believe, sometimes correctly, to be financed in al-Qaeda and other Islamist groups. The flying money gets to flood largely under the radar, therefore, despite Ping's incarceration. In 2007, in response to rich Chinese parking massive sums of cash outside the country, give you an illustration. I think at one point the Bank of China said that I think it was like 18,000 Chinese officials had escaped the country with up to $7 million each,

which is unbelievable. The CCP passes a new law preventing Chinese citizens from purchasing more than $50,000, in foreign currency. I think, you know, they would do some of this through real estate, right? Like in Manhattan, Vancouver, London. Yeah. That's got to have been a loophole because I think it was still happening up until like five, six, seven years ago. I know in New York City, at least, and I imagine Vancouver as well.

I think that was a big spot. But like, you know, it was all these like, not ghost apartment buildings, but all these really elaborate high rises with like single floor apartments that were going for like tens of millions of dollars or, I don't know. Yeah, double or what is a nine. eight digit, eight digit numbers, and a lot of them are getting bought, and I think a lot of it was Chinese money or people parking money they didn't want the regime to steal. Yeah, I mean, that was the whole thing about Hong Kong, right?

That it was like a bit ekey for the Chinese government because so many of their officials had like illegally parked money in Hong Kong, so they weren't kind of going all out to take it at first. But there's like, I might do a story on this when I'm out there, but in LA, in DTLA, there's a place that's like a gigantic skyscraper that was built all with Chinese money. And now that the arse has fallen out, the Chinese economy, they've all run away. And now the thing's just like covered in graffiti. It looks like that thing in Venice.

Oh, yeah. Yeah, I've seen that built. Yeah. So, yeah, this is huge. I think it's happening in Australia loads as well. I mean, you know, everyone parks money in Australia. But this 2007 law, which has this impossible, long, sounding name, like some Japanese game show. this really, really changes everything, right, these capital controls.

So after decades of interests and incentives aligning to help the underground bankers, this is like the key sliding into the final pin of the lock, right? It lets the key turn and it opens a floodgate of illegal finance. I mean, almost overnight underground bankers have a quote, captive demand, in the words of organized crime expert Vanderfeld-Bad Brown, of Chinese people looking to circumvent the 2007 law, and they are going to pay through the nose to do it. Feldab Brown adds that this allows Chinese flying money brokers

who are already working with the mob by this point to offer an even better deal, one that will completely wipe out any local money laundering competition. They can, she says, quote, impose most of the fees on Chinese customers while charging much less to their criminal clients. So basically Chinese want to get their money out, the mobs want to get their money in. So you've got people on both sides of these equations that are desperate to do this thing

and the brokers are just like, okay, well, if the Chinese are so desperate, then they can pay the fees and I'll get even more mafia work. This is where it really starts to go nuts. And you would think like the CCP would go hard on this. I mean, after all, in 2012, Xi Jinping becomes Chinese leader and he immediately sets out purging corrupt officials and those he claims are on the take, not least from triads and golden triangle narcos who are flooding China with cheap meth and causing a huge addiction crisis in China. For more on this, listen to our recent show on the Cocaine Cowboys, there's some really cool

information in there. But here's the thing. This logic only works if you assume Xi actually wants to clean up the CCP and not just use anti-corruption as a cudgel to clear out all these political enemies. And second, whole swaths of China are still whole swaths of China are still whole. horribly poor and completely reliant on the production of counterfeit goods and drug precursors. These are industries that rely wholesale on underground banking. So if the government goes too hard on them, it's going to just make entire parts of the country jobless,

and that is no good thing. Says Lawrence Howland, a former financial crime attach to the British Embassy in Beijing, these illegal markets keep, quote, whole communities afloat in areas that are still very third world where there is no easy source of outcome. The Chinese are constantly balancing the need to enforce the law and maintain some image of collaboration and cooperation with the need to ensure that the economy keeps growing. I mean, there's this crazy place called Yiwu International Trade City, for example.

It's like it's the world's smallest large commodities market. That is a haven for all your cheap shit made in China stuff that you get advertised on Instagram. Everyone there, Lawrence tells me, uses flying. money transactions. Quote, the whole system is reliant on Chinese underground banking. One of the marks of success is having the police come around and make life a little bit difficult for you. So like, what he's saying is, the Chinese banking is so onerous and the bureaucracy is so nuts. I think he said that these underground bankers are the difference between just meeting a guy around the back

streets and doing a transaction in moments and sitting in the bank of China for a day. So what do they do? Yeah, they do the former. Now remember Ji Ji Li, the star of our cold open? He is well on his way to notoriety by this point. As I mentioned, Lee grows up in poor Guangdong until 1983, when, age 10, his folks moved the family to Mexicali, which is a city on the border between California and Baja, California. Chinese have been coming to Mexicali since the end of the 19th century,

and by the time Lee arrives and he works at a family restaurant, they are famed for having built an incredible network of subterranean tunnels around town, ostensibly to escape the burning Baja sun. But the tunnels do way more than that. But if a regular cafe or diner, for example, you might have an opium den or a poker joint, or a bar, or even a hospital, or in one case, a jail. Apparently you can visit these things today. They look really, really cool.

Are there any of those in Mexico City? Because I'm actually heading there this week. and don't really have plans. So, you know, if you're one of our listeners and you know where those opium dems are, just shoot us an email. Let me know. Yeah, I'm really going to an opium den and reporting for the show in a big documentary you're going to be doing, right? No reporting.

That is a shame. Anyway, as Mexican cartels to overtake their Colombian counterparts in the 90s in the global narco trade, these tunnels become the perfect place to park, as it waits to cross the border into the US. One of Lee's relatives smuggles contraband and migrants into California, and despite being a pretty diligent kid, good at school, hardworking, he follows this relative into a life of crime. Age 16, Lee and his family move north to Los Angeles, where he gets in with members of the 14K

triad, which by then is one of the largest such groups in the world. By the early 2000s, Lee has figured out how to conduct flying money transactions, and he gets in the transactions, just like the ones I've described, finding Chinese desperate to get their cash out of China and matching them with cartels wanting to wash their drug proceeds. Here's Sebastian Rattello writing in Po Publica. It's a really great story who put the notes in there. Quote, Lee's system generally worked like this. Cartel operatives in the US would arrange a contract with him, often to launder about $350,000,

a quantity of cash that fit into a suitcase. case. Cartel transporters handed over the dollar loads to Lee's couriers, who sent Lee or his lieutenants a photo confirming the handoff. Lee then delivered the sums in Mexican pesos to drug lords from safe houses in Mexico stock with that currency. It's super simple, super efficient, and all done for a tiny price. Says one retired DEA agent, quote, the Chinese are doing it for one to two percent commission on average, and the speed at which they do it is unbelievable. The absolved the risk. You know it will get paid. In 2013, Xi Jinping and then Mexican president Enrique Pena Nieto signed a massive trade deal between China and Mexico, which skyrocketed

legal business between the two nations. Like I said previous, criminals piggyback on this. And around the same time, American overdose deaths from synthetic opioids, particularly fentanyl, go through the roof. That is no coincidence at all. In 2016, as fentanyl overdose deaths overtake heroin for the first time ever, New York regulators find the Agricultural Bank of China, one of its biggest, $215 million for violating money laundering regulations. I was looking at this last night, actually, on a fact check, and they, I think they did tons of stuff, including like sanctions violations in Yemen and Iran and Venezuela. But among them was this like, huge, huge client they had, I think that was using a Turkish bank to funnel funds from a

bank of Afghanistan account that was known to be part of the fentanyl trade. So we're naughty, naughty boys, the agricultural bank of China. And actually, the money involved in these Chinese banks is insane. I think the agricultural bank of China, and I think it's also like the construction bank of China's at its palms wrapped as well. And then there's the Bank of China and another one I'm forgetting, but these big four, they handle 22, I think he is, $22 trillion. They are, all four of them are the four biggest banks in the world. And they handle like almost as much money as the entire US economy.

So they're basically too big to fail. You can't sanction them because you're basically then just declaring war on China. At first, I didn't think it was real. I woke up to this blinding light. And I was transported to another place. Pluto TV. Then I heard a voice. Come with me if you want to live.

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but anyone can get the same premium wireless for $15 a month plan that I've been enjoying. It's not just for celebrities, so do like I did and have one of your assistance assistants to switch you to MintMobil today. I'm told it's super easy. to do at mintmobile.com slash switch. Up front payment of $45 for three-month plan, equivalent to $15

per month required. Intro rate first three months only, then full price plan options available, taxes and fees extra, feeful terms at mintmobile.com. Anyway, this 2016 thing, it's the first high-profile time that a U.S. court has openly said that Chinese accounts are being used to wash fentanyl cash. And it becomes a huge source of diplomatic tension, right when the new president, Donald Trump is launching a trade war against Xi and China. Some have said that these state-owned banks can't not know about this trillion-dollar industry. And also given WeChat and like Ali Pay is monitored by the CCP, some of the more hawkish U.S. experts believe that Beijing is now letting flying money fly

to exacerbate the fentanyl crisis and weaken the states, which is unbelievably cynical, but that doesn't make it untrue either. That same year, of course, in 2016, Gigi Lee survives his assassination attempt near the MGM Golden is shitty Guatemala City casino. His is an empire that straddles the old and the new worlds of flying money, conducting business via WeChat and social networks, but also buying up apartment blocks and gambling dens to Lord of Cash too,

just like the Golden Triangle Triads of Old. It is actually remarkable people like this who aren't boring to this sort of thing, figuring it all out like this. I mean, it just shows a level of genius that that needs to be appreciated in a way. Yeah, I reckon like if you're a kid growing up now, speaking English, Spanish, and Mandarin fluently is probably a pretty good ticket to quite a lot of money. Anyway, as smooth an operator as this guy is, he's unfortunately, or fortunately, on the way down. In 2017, agents arrest one of his most trusted money managers,

who's a Brooklyn-based Chinese migrant who'd been living in Belize, and that is all kinds of red flags. This guy pleads guilty to conspiracy to laundering money, and he gets a 60-month sentence. Then in 2017, DEA agents following up on cocaine deals in Memphis, Tennessee, get wind of Lee's names from informants. They track his transfers across the Americas and Asia, and they realize, this guy is no middleman, right?

He's a pioneer. He's got millions flying all. over the world and a genius team logging all of it. Brites Ratteller, quote, operating with the acumen of a financier and the tradecraft of a spy, he had helped devise an innovative system that revolutionized the drug underworld and fortified the cartels. Agents on stakeout then watch cartel capos hand these suitcases stuffed full of cash

to these Chinese couriers. The couriers don't have criminal records or carry guns. They're just students, waiters, drive. Because few of them speak English, they rely on a signal, which is a photo of a serial number on a dollar bill, just like the tea traders of the ancient Tang dynasty. Lee is so confident that he even guarantees the narco's free replacement of any cash lost in transit. But in 2019, the DEA lures Lee to a meeting with a fake associate in the Mexican city of Marida.

Federals then capture Lee and they deliver him to DEA agents in Houston. Lee spends four and a half hours answering questions from offices in English according to the court documents and he admits he's into quote financial transactions involving bad money. In October 2021, Lee is sentenced to 15 years prison for laundering up to $30 million for Latin American cartels. But obviously, with a market so lucrative and underground bankers more common than my accent before I moved to Broaden when a weird and BBC and middle class, getting Lee solves pretty much. Nothing. It's just a gigantic game of whack-a-mole. Recent stings have snagged multi-million dollar flying money schemes in Europe, Singapore,

Australia, Spain, even here in New Zealand. John Coyne, who's a former cop and think tanker in the Aussie capital city, Canberra, told me that it's all about the three Vs, volume, variety and velocity. Quote, the Chinese economic miracle has meant that volume, velocity and variety of transactions has increased. So naturally, if you want to, to hide illegitimate transactions, that provides you with very significant opportunities. In order to fight this kind of sophisticated crime, he adds quote, requires access to multiple jurisdictions, it requires quantitative research skills, it requires data science skills,

it requires high-level financial skills. And those sorts of skills are not in huge supply to people in government, but if I'm working for an organized crime group, they're relatively easy to get a hold of. Over in the US, there are still very few law enforcement agents who can speak fluent Mandarin, unlike when they were fighting, say, the Italian mob in the 80s. It's an arms race, basically, and right now, the crooks are winning hands down. And the incentives for underground bankers just keep on coming. China's property markets collapse, for example, meaning that even more rich Chinese are buying up pay-for-play foreign passports and sneaking their cash outside of China. One NGO, for example, expects more than 700,000 Chinese to leave in the next two years.

They're already pouring cash into construction projects like we said in Australia, Canada, the UK and beyond. So I'm just saying if they're watching the construction projects and really scrutinizing them, podcast, my Chinese friends, podcast, just an untapped market of washing your money. I genuinely now want to know how many people are trying to listen to us. Can they listen to us? I have no idea. British police Not after this episode

No after this one No definitely not Yeah British police recently discovered that Chinese students were even being used as a backdoor to get money into its legitimate

financial system from China And on the other end The accounts of poor Chinese people Are being used by the rich To circumvent those 2007 capital control laws This is called smurfing Which is, I found Actually a gaming term

For the use of a second secret accounts I'm kind of like people using an alt Twitter profile or something. Smurfing. Smurfing. Yeah, I know. It sounds kind of bad, especially now that I've talked about students and backdoors. Anyway, this makes things very difficult when the political message from Washington and Beijing is that fentanyl deaths and money laundering are actually a great way for both countries to find common ground.

Because everybody wants fewer OD deaths and to smash the Mexican cartels. China doesn't want to be bleeding more and more currencies of the States, right? well, last November, US and Chinese diplomats agreed on a bunch of fent-related stuff. China has agreed to monitor and prevent the export of pill presses and precursors, for example. This April, Janet Yellen came back from Beijing with something called, here we go, the Joint Treasury People's Bank of China, cooperation and exchange on anti-money laundering bill. It's so snappy, man.

This will, Yellen claims, enable Chinese and American counterparts to quote, share best practices and information to clamp down on loopholes in our respective financial systems. Fentanyl deaths are now over 80,000. That is more than firearms or car wrecks combined. An NGO chief in D.C. told me that, quote, China did some real things that are going to make some real difference in that policy area. But only a Pollyanna would believe this will end the Mexican-Chinese criminal partnership. Quote, there is not much in the way of a buddy cop film to be made.

made about US-China cooperation on anti-money laundering or fighting crime in the region at all. Once we get towards politically sensitive cases, get close to the Chinese government like implicating Chinese state-owned banks, then that corporation is likely to hit a brick wall. Because China won't want to admit that these core institutions are closely involved, either wittingly or unwittingly in these criminal networks. And people who run these banks are often part of the Central Committee and fairly high-ranking officials. Okay, but hear me out, right? Jackie Chan and Pedro Pascal, budget cap film, you know, Mexico, Mexicali, wherever, going after money launderers and fentanyl dealers. I mean, it'll,

it'll do numbers. You get Chris Tucker as a guest appearance. It'll just, it'll work. It works. It does work. Genuinely, that would genuinely work, actually. Yeah. I might start scribbling out a few notes after this. Anyway, the banks are too big to fail, unlike Danny's movie ideas, is what this guy and this assumes that China and the US actually want to solve the problem because actually Fentinell is causing havoc on American streets and chucking a grenade into the country's health system and politics and DC would actually love to see more capital flight from China which might prompt its economy to fail even harder and accelerate a regime change I think what was it Axel Roses saying about that anyway perhaps even the death of Chinese

communism and you can bet that for all the talk of smashing cartels and money launderers and making streets safer. These are the incentives that are truly driving today's explosion in flying money. All right. Yeah. How much of that did you understand, like a percentage point? I mean, I, yeah, a healthy amount. What I'm saying is if people listen to this twice or maybe three times, we will get more money.

So complexity works. I don't think that's true, but I like what you're doing here. But yeah, as always, bonus episodes, patreon.com slash internet world podcasts, Spotify or iTunes. To all of you who made it those far, we salute you. Oh my God, yeah, you're heroes. All right. Next week. Later.

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