The Journal. – "Drug Cartels' New Weapon: Chinese Money Launderers"
Date: December 22, 2025
Hosts: Ryan Knutson & Jessica Mendoza
Featured Guests: Dylan Tokar (WSJ reporter), Julie Shemit (Former DOJ money laundering expert)
Episode Overview
This episode investigates the emergence of Chinese Money Laundering Organizations (CMLOs) as dominant players cleaning money for Mexican drug cartels, focusing on Operation Fortune Runner, a years-long effort by U.S. law enforcement to dismantle a powerful Chinese money laundering ring. Through firsthand accounts and investigative reporting, it explores how global financial constraints, technological barriers, and sophisticated trade-based laundering empower these networks—and why the U.S. anti-money laundering system is struggling to keep up.
Key Discussion Points & Insights
1. The Art of Following the Money
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[00:05 – 01:22]
- A high-stakes surveillance follows Jia Yong Yu, suspected money handler, depositing $100,000 in cash at a Los Angeles bank—far exceeding the $10,000 reporting limit.
- Law enforcement is tailing Yu as part of a broader probe into Chinese money laundering organizations serving Mexican cartels.
Notable moment: Teller reveals, "More like $100,000." – (Bank Teller, relayed by Dylan Tokar, [01:22])
2. Rise of the Chinese Money Laundering Organizations (CMLOs)
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[03:39 – 04:38]
- Julie Shemit explains the axiom: "The money laundering side is a window into the larger organization... If you want to pursue drug traffickers... It doesn't have any meaning until you actually start to see how the money... is getting to the people who actually own those drugs." (Julie Shemit, [03:57])
- Traditionally, Latin American launderers worked for Mexican cartels. In recent years, an influx of Chinese groups (CMLOs) have taken over due to high efficiency and low fees.
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[05:00 – 07:44]
- After China enforced a $50,000 annual cap on overseas money transfers in 2016, Chinese citizens abroad sought illicit routes to convert yuan to U.S. dollars.
- CMLOs exploit this demand: they undercut traditional rivals by charging minimal commissions (1-2% vs. 5-10%, [07:23]) because they're also making money from Chinese clients.
"Typically, the percentage was anywhere from 5 to 10 to even more. And the Chinese started charging 1 to 2% to move money." (Julie Shemit, [07:23])
3. How the Laundering Scheme Works
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[08:53 – 10:53]
- Operations center on a ringleader, Cai Zhang, whose group launders vast sums using a "shadowy network of money brokers."
- The process:
- Cartel cash is deposited with the broker.
- Broker sells U.S. cash to Chinese nationals in the U.S., who pay in yuan.
- The yuan is then used to buy goods in China, which are sold in Mexico for pesos—completing the cycle for the cartel.
- Goods trafficked range from luxury items to jeans and electronics.
"That narcotics money is used to buy those goods, and the goods are shipped to Mexico, where they're sold for pesos. And the Pesos are turned back to the cartel." (Julie Shemit, [09:42])
- China's global export economy offers further advantages: plenty of buyers for Chinese goods and currency in Mexico.
4. Outsmarting the U.S. Banking System
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[10:53 – 12:59]
- Unlike cautious launderers, CMLOs brazenly deposit well over $10,000 per transaction—unconcerned about triggering "suspicious activity" alarms.
"They don't care whether the banks are going to flag the amount of money... They're regularly depositing much more than $10,000." (Dylan Tokar, [11:34])
- They exploit banks’ slow anti-money laundering processes: account closures take months, and alerts often languish in rarely checked databases.
- They constantly cycle through fake identities and new accounts, making oversight nearly impossible.
5. The Fortune Runner Case – Investigation Challenges
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[15:40 – 18:48]
- Traditional wiretaps useless: CMLOs coordinate over WeChat, which does not cooperate with U.S. authorities.
"WeChat is based in China, and they do not cooperate with US Law enforcement... there is no way to get information." (Julie Shemit, [16:00])
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Investigators rely on painstaking surveillance, building a case by tailing couriers, observing exchanges, and connecting money pickups directly to known drug traffickers.
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The major break: a border photo showing Zhang’s associate in the car with a Sinaloa cartel handler—a "smoking gun" proving the direct tie between the cartel and the Chinese laundering network ([18:25]).
"Everybody was completely blown away because it was proof that at least the money laundering arm of the drug trafficking organization was in close contact with the Chinese underground banking network." (Julie Shemit, [18:48])
6. Bringing Down the Ring
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[20:04 – 22:35]
- Agents gather evidence through surveillance and cash seizures (including that initial $100,000 drop).
- A key moment: as one of Zhang's lieutenants tried to fly to China, arrests commenced.
- Zhang himself was apprehended after being pulled over for texting while driving, caught with suspicious cash.
"Zhang tells the task force officer, it's not drug money. He says, I know a lot of rich people, and I move a lot of money for rich people." (Dylan Tokar, [22:06])
- In total, 24 individuals indicted in Operation Fortune Runner; half pleaded guilty, others at large or awaiting trial.
7. What’s Next? – Systemic Problems and the Tip of the Iceberg
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[23:09 – 24:39]
- Impact on cartels is real but limited: these networks can "make a dent," but essentially, "it's the tip of the iceberg." (Julie Shemit, [23:44])
- Cartels have multiple laundering channels to compensate for losses.
- Raises awareness among Chinese brokers: increased U.S. scrutiny may deter some, but the overall system remains vulnerable.
"I think it's the tip of the iceberg. I think there's a ton more going on." (Julie Shemit, [23:44])
"It was very clear... this was not the only way that Sinaloa was laundering its money in LA county area. I mean, they have multiple, multiple ways." (Dylan Tokar, [23:52])
Notable Quotes & Moments
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On why laundering matters:
"You can swat bees, but you really want to find the hive."
(Ryan Knutson & Julie Shemit, [04:33]) -
How law enforcement felt seeing the cartel and Chinese launderer together:
"Everybody was completely blown away because it was proof... the money laundering arm of the drug trafficking organization was in close contact with the Chinese underground banking network."
(Julie Shemit, [18:48]) -
On the limitations of the U.S. banking safeguards:
"The safeguards that have been put into the system actually don't really work that well."
(Ryan Knutson, [12:59])
Timestamps for Key Segments
- [00:05 – 02:25] — Opening Surveillance & Introduction to Yu
- [03:39 – 05:32] — Interview with Julie Shemit; Shift to CMLOs
- [05:32 – 07:44] — Why Chinese Brokers Took Over
- [08:53 – 10:53] — Cai Zhang & The Scheme Explained
- [10:53 – 12:59] — Bank Vulnerabilities and Launderers’ Methods
- [15:40 – 16:26] — Obstacles: Wiretapping and WeChat
- [18:25 – 19:34] — The Border Photo: Smoking Gun
- [20:04 – 22:35] — Arrests and Zhang’s Defense
- [23:09 – 24:39] — The Systemic Scope and “Tip of the Iceberg”
Summary
This episode paints a vivid, detailed picture of how globally-connected Chinese money laundering organizations have revolutionized cartel finance—outgunning old rivals through speed, audacity, and dual-side profit motives. Even as the U.S. manages some investigative wins, the overall architecture of anti-money laundering remains sluggish and easily outflanked, raising questions about the extent of the threat and our ability to keep up.