WSJ What’s News - How Chinese Money Launderers Are Moving Billions Through U.S. Banks

Episode Date: August 28, 2025

P.M. Edition for Aug. 28. The Treasury Department has put out a report about a Chinese money laundering network that has moved billions of dollars through U.S. banks, and how that money is being used to support criminals like Mexican drug cartels. WSJ reporter Dylan Tokar joins to discuss how the network functions, and what the Trump administration is planning to do about it. Plus, Federal Reserve governor Lisa Cook files a lawsuit over President Trump’s attempt to fire her. And starting at midnight tonight, shipments of goods to the U.S. worth $800 or less will be subject to tariffs. We hear from Journal reporter Esther Fung about who will be footing the bill. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Fed Governor Lisa Cook has filed a lawsuit against President Trump over his attempt to fire her. Plus, how the Trump administration plans to crack down on a major money laundering network. The Trump administration says it's going to prioritize investigating cases related to fentanyl. Related to drug traffickers in the Mexican cartels and related to Chinese money laundering groups. And why even small packages shipped to the U.S. from overseas are about to cost more. Thursday, August 28th. I'm Alex O'Solev for the Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. Yesterday, we mentioned that Federal Reserve Governor Lisa Cook was expected to sue President

Trump over his attempt to fire her. Today, she did it. The lawsuit filed in Washington, D.C. Federal District Court alleges that Trump violated the law. law by attempting to remove Cook from her post without a valid reason. The suit sets up an unprecedented legal battle that will test the president's power over the independent central bank's seven-member board. Earlier this week, Trump cited allegations that Cook submitted fraudulent information on mortgage applications and said he was prepared for a legal fight. The lawsuit also names Fed Chairman Jerome Powell and the Fed board as defendants and seeks to block them from complying with Trump's order to remove her. A Fed spokesman declared.

to comment on the suit. The Fed previously said it will abide by any court decision on the matter. Separately, Senate Republicans expressed alarm today at the abrupt firing of the head of the Centers for Disease Control and Prevention and pushed to delay a vaccine meeting scheduled for next month. It's a reflection of growing concerns about the nation's health policies overseen by Robert F. Kennedy Jr. As we mentioned on this morning show, the CDC's leadership was thrown into turmoil yesterday by the White House's announcement that it was firing Susan Menares, who had been confirmed to the post less than a month earlier. Several other top agency officials also resigned,

citing what they saw as ideological meddling that challenged the agency's scientific integrity. White House Press Secretary Caroline Levitt said today that Kennedy asked Menares to resign, and she initially said she would, but then reversed herself. The U.S. economy grew at a faster pace than previously thought in the second quarter. The Commerce Department said today that gross domestic product expanded at a seasonally and inflation-adjusted annual rate of 3.3% in the quarter.

It had previously said the economy grew by 3%. WSJ economics reporter Conrad Putsier told us what the revision means. This is good news for the economy. What it basically shows is that businesses and consumers were in slightly better shape in the second quarter than we thought they were. Consumer spending grew more strongly than we'd previously thought, and there's been more growth in business investment than people previously estimated particularly software investment grew at a faster pace than previously thought some economists think

that it has something to do with AI, which has basically been a big driver of economic growth in recent years and is really contributing to the economy. It's not a huge deal with this revision, but it still matters because basically everyone's trying to figure out which shape is the economy in. And what this basically means is that the economy is growing at a healthier pace than we thought, but it's still not growing very quickly. If you look at the first half of the year overall, the average growth is 1.4%, which is no fast growth at all compared to prior years. So this is not a booming economy by any measure.

And the other thing to keep in mind is that this is the second quarter, which at this point is almost two months ago. It doesn't really tell us all that much about how the economy is doing right now, but it's still a good sign. The revised GDP numbers sent U.S. markets higher, with the S&P 500 and the Dow hitting new closing highs today. rose about 0.2%. The S&P 500 added roughly 0.3%, and the NASDAQ gained about 0.5%. The European Union said it will move to eliminate all tariffs on U.S. industrial imports and expand access for

American farm products. It's part of an effort to shield European automakers from steeper duties on their exports to the U.S. The proposals follow a joint statement last week in which Brussels and Washington agreed to cut levies on European autos to 15% from a provisional rate of 27.5%. In return, the EU committed to lowering tariffs on a range of U.S. goods. Higher U.S. duties have rattled Europe's auto industry, with manufacturers from Stalantis to Porsche reporting sharp declines in recent sales. The measures will now go to other EU institutions for approval. Well, in other tariff news, starting tomorrow, even Americans' small purchases from international shippers will be subject to tariffs.

In July, the White House announced that it was suspending the de minimis provision, which allows shipments worth $800 or less to enter the U.S. tariff-free. The suspension will go into effect at midnight tonight. For more on this, I'm joined by Esther Fung, who covers parcel shipping for the journal. Esther, who will be paying? these tariffs? It depends, actually. For a shipper or a merchant that's selling these items, when they bring these items to their carrier, they can decide whether they'll pay the tariffs, or they could also tell the carrier that it's the recipient who's going to pay the

tariffs. The latter, it's called the delivery duty unpaid option. That option is not a great option for consumers who've been so used to getting all these packages to their homes without having to pay an extra tariff bill. Let's talk about that merchant side for a minute. So how are companies starting to respond to this already? The larger companies, their customs brokers, would probably already provide them processes and steps that they can take. If they had inventory abroad, say in warehouses in Mexico or Canada, some of them have already brought their inventory into the United States so that these items could be fulfilled domestically and you don't have to deal with additional import fees. For the smaller businesses who don't have access to

customs brokers or a lot of warehouse space in the U.S. Some of them have said that they've just suspended selling to U.S. customers. For the smaller business, it's been a lot more chaotic for them. Let's say that I, a consumer, place an order for a $100 pair of sneakers online today. How might this de minimis provision affect what and how and when ultimately lands on my doorstep? If you purchase from a retailer that has already figured this out, that Rita likely would let you know online that the tariff is already paid. You're in good hands. That's the best case scenario for you. The worst case scenario would be when the package is on its way to you,

you might get a notification from FedEx, could be UPS, could be DHS, that, hey, you've got an import duty due and what the amount is. And you might have to pay it online before they deliver the package to you. That was WSJ reporter Esther Fung. Thank you, Esther. Thank you. Coming up, how Chinese money launderers are moving billions of dollars from. from Mexican drug cartels through U.S. banks. That's after the break.

It won't take long to tell you neutrals ingredients. Vodka, soda, natural flavors. So, what should we talk about? No sugar at it? Neutral. Refreshingly simple. The Treasury Department said today that Chinese money launderers appear to have moved as much as $312 billion in illicit transactions through U.S. financial institutions in recent years.

Their goal was to aid criminals, including Mexican drug cartels. Chinese money laundering networks are now the dominant player in an illicit money services industry used by some criminal groups, and they're drawing scrutiny from the Trump administration. Reporter Dylan Tokar covers corporate crime for the journal and is here now with more. Dylan, just briefly walk me through how this money laundering works. Sure. So what's happening here, what's behind this money laundering activity, is a black market for U.S. cash that's really being driven by people in China.

In China, there are restrictions against how much money you can bring out of China. and there's a lot of wealth in China and wealthy people in China who are trying to get around those restrictions. So the way we've seen this work in the public cases that we've been able to look at is you have a drug trafficker selling drugs they've smuggled into the U.S. The cash they make from those transactions, they then drop off with a Chinese money laundering network. And then they're going to look for ways to launder it. And they have a few different ways to do this. One is to just take this money to a bank and deposit it there.

They also oftentimes sell the cash directly to Chinese underground banking customers. The Chinese customer, they're actually paying for that money in China with Chinese currency. So cash doesn't actually have to travel across borders because there's these series of mirror transactions that allow value to be exchanged without ever having. across a border. It sounds like a certain amount of this money is winding up in U.S. banks. Are they checking for this kind of thing? So banks have obligations to screen for suspicious activity, generally speaking. And the anti-money laundering regulator tries to give banks and other financial institutions indicators or specific types of crimes or typologies that they should be looking out for. And the Treasury Department's financial crimes enforcement network, also known as

FinCEN, put out a big report about these Chinese money laundering groups. And it also put out an advisory that lists a series of red flags that banks should look for when they are screening transactions for suspicious activities. So the Trump administration is putting a little bit more scrutiny on this practice. What exactly are they doing about it? These types of money laundering networks have been around for at least a decade. The Trump administration isn't the first one to try to investigate some of this activity, but based on what we've seen in terms of the law enforcement priorities of the Trump administration, it makes sense that this would be something that would work its way up the list.

They are very focused on Mexican cartels in the U.S. fentanyl crisis, and they're very focused on China in particular as well. And China plays a role in both manufacturing some of the precursors for fentanyl and also this emerging role as sort of a money laundering hub. So the Trump administration says it's going to prioritize investigating cases related to fentanyl, related to drug traffickers in the Mexican cartels, and related to Chinese money laundering groups, among a number of other things that they are saying are priorities for them. That was WSJ reporter, Dylan Tokar.

Thank you, Dylan. Thank you. Russia launched a deadly barrage across Ukraine, today. The large-scale attack left at least 18 people dead, the worst death toll in Kiev since Trump held talks in Alaska earlier this month with Russian leader Vladimir Putin. The strike, which hit Ukrainian civilian infrastructure and EU and British offices, was the clearest signal since that summit of Putin's desire to eschue Trump's peace efforts. Ukrainian President Volodymyr Zelensky called the barrage, quote, a horrific and deliberate killing of civilians. Kremlin spokesman

And Dmitri Peskov said today's strikes against Ukraine are successful and that targets are being hit, though Russia remains interested in peace talks. And that's what's news for this Thursday afternoon. Today's show is produced by Anthony Bansy with supervising producer Michael Cosmides. I'm Alex Oslo for the Wall Street Journal. We'll be back with the news show tomorrow morning. Thanks for listening.