According to a new report by TRM Labs, China’s underground banking networks have become a critical financial infrastructure powering international organized crime. Far from being marginal players, these covert systems are now the financial lifeline for Mexican drug cartels, North Korean hackers, and wealthy Chinese nationals seeking to bypass strict capital controls.


🔍 "Flying Money" Outside the System

These informal networks, known as “fei qian” or “flying money,” operate entirely outside traditional financial oversight. They use systems such as mirror exchanges, where massive sums are shifted across borders without triggering any official banking alerts.

A common method: a broker in the U.S. collects cartel cash, while their counterpart in China releases an equivalent amount to a client — often in cryptocurrency. No banks involved, no digital trail.


🤝 Criminal-Banker Symbiosis

TRM Labs describes the relationship between these underground banks and global crime syndicates as a mutually beneficial ecosystem. Cartels can repatriate illegal drug profits, while Chinese clients evade strict financial restrictions. Brokers typically earn small fees (1–2%), but the volumes are enormous.

The network is growing rapidly and facilitates a wide range of criminal activity — from fentanyl trafficking to sanctions evasion by Russian and North Korean entities. The system thrives on encrypted communication platforms like WeChat and Telegram, exploiting weak regulatory frameworks across various jurisdictions.


💊 Drug Money Pipeline Between China and America

Perhaps the most alarming revelation is how these networks serve as a dark financial conduit for the booming U.S.–China drug trade. The Sinaloa cartel, for instance, is believed to launder hundreds of millions of dollars each year through underground Chinese banking services.

TRM Labs details how cartel-linked operatives in the U.S. deposit drug money into crypto ATMs or exchanges, convert it into bitcoin, and then transfer it to Chinese-controlled wallets. These funds are then used to purchase precursor chemicals for fentanyl production or other goods reinvested into the drug supply chain.


💣 Blockchain: A Tool for Crime and Enforcement

The speed, anonymity, and global reach of cryptocurrencies make them ideal for large-scale laundering. The only way to disrupt this ecosystem, TRM says, is through advanced blockchain forensics targeting key players — particularly OTC brokers who act as conversion points between crypto and fiat.

There have been wins, such as the freezing of North Korean-linked accounts on Binance in 2022, but TRM warns that these networks are evolving rapidly, and law enforcement must innovate faster to keep up.


📉 A Global Challenge for Regulators

China’s underground banks are no longer a domestic issue — they’ve become a globalized financial shadow system that links digital finance with the criminal underworld. They act as a silent bridge between illegal profits and real-world commerce, all while evading traditional controls.



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