When people talk about money laundering, the first finger often points toward cryptocurrency. Politicians and regulators love to highlight the risks of digital assets, portraying them as the go-to tool for criminals. But new findings from FinCEN tell a very different story, one where traditional banks, not crypto exchanges, handled the bulk of dirty money.
According to the latest analysis, US financial institutions processed a staggering $312 billion in suspicious transactions tied to Chinese money laundering networks between January 2020 and December 2024. This was based on a review of over 137,000 Bank Secrecy Act reports.
Meanwhile, crypto platforms face intense global scrutiny for far smaller amounts of illicit activity.
How the Networks Work
Chinese laundering groups have built sophisticated partnerships with Mexican drug cartels. Here’s how it works: Mexico’s currency laws prevent cartels from depositing large amounts of US dollars into local banks. At the same time, China’s strict currency controls limit how much its citizens can move overseas.
That gap creates an underground marketplace. Cartels sell their illicit dollars to Chinese nationals, who want to bypass Beijing’s capital restrictions. The result? Billions flowing through American banks under the radar.
But it doesn’t stop at narcotics. These networks also stretch into human trafficking, healthcare fraud, and real estate, with suspicious property deals alone reaching $53.7 billion. FinCEN flagged more than 1,600 reports tied to human trafficking and even uncovered almost $766 million in shady adult day care operations in New York.
Banks Handle the Bulk But Avoid Real Punishment
The numbers tell the story:
- Banks moved $246 billion of the total suspicious activity.
- Money service businesses handled $42 billion.
- Securities firms processed $23 billion.
That means banks are the main channel averaging about $62 billion a year in dirty Chinese money.
And this isn’t the first time. Big banks have a long history of getting caught up in massive laundering schemes:
- Wachovia Bank let cartels launder $350 billion from 2007 to 2010, yet paid just $160 million in penalties.
- Danske Bank pushed $228 billion in suspicious Russian funds and ignored internal warnings.
- HSBC paid $1.9 billion in 2012 for laundering cartel money using specially designed “cash boxes.”
- TD Bank shelled out $3 billion after prosecutors found it helped move $470 million through Chinese networks.
- Even the infamous 1MDB scandal funneled more than $1 billion through major banks to fund luxury yachts, mansions, and art collections.
The pattern is clear: banks pay fines, but business goes on as usual.
Crypto Gets the Blame
Here’s where the contrast becomes glaring.
“Cryptocurrency transactions represent ‘less than 1%’ of total money laundering activity globally, according to TRM Labs.”
Chainalysis data backs this up, showing $189 billion in illicit crypto activity over five years, compared to over $2 trillion laundered annually through banks. Yet, regulators continue cracking down hard on crypto platforms.
Binance Australia was recently forced to hire an external auditor after AUSTRAC flagged compliance issues. French authorities are probing Binance too, while OKX faces possible penalties in Europe. Regulators in Australia even shut down nine smaller providers for failing anti-money laundering checks.
Meanwhile, the banking sector handling far larger amounts continues to face far lighter consequences.
The Politics of Blame
Senator Elizabeth Warren summed up the government’s position:
“Bad actors are increasingly turning to cryptocurrency to enable money laundering.”
But FinCEN’s own numbers don’t support that claim. In reality, Chinese money laundering networks are using traditional banking channels as their primary tool, not digital assets.
Even with crypto-related crime rising slightly in 2024 (hitting $51.3 billion), it’s still just a fraction of the suspicious transactions flowing through US banks in the same timeframe.
The Bottom Line
Crypto may be the popular villain, but the real laundering pipelines run through the world’s most trusted financial institutions. Banks move hundreds of billions in dirty money while crypto barely scratches the surface yet regulators keep shining the spotlight on digital assets.
The question now is whether policymakers will ever admit the obvious: the biggest risk isn’t in blockchain, it’s in the banks.
