Blockchain intelligence agency TRM Labs' latest report shows that China's underground banking network (commonly known as "shadow banks") is increasingly using crypto casinos and online entertainment platforms, becoming a core channel for international organized crime money laundering.
These underground banks bypass traditional financial regulation, support drug trafficking, sanctions evasion, and other illegal activities, relying on the fast and anonymous characteristics of cryptocurrency cross-border transfers to provide "invisible protection" for criminal funds.
The report points out that the Chinese Triad groups actively use underground banks and cryptocurrency technology, continuing their previous method of laundering drug income through casinos in Macau and Hong Kong. Nowadays, these gangs have expanded their operations to Southeast Asia, operating physical and online casinos and telecommunications fraud centers, becoming a key hub for crime money laundering.
During the pandemic, physical casinos moved online, and fraud groups generated substantial cryptocurrency profits through online gambling and "pig butchering" scams, urgently needing money laundering channels. The Triads cleverly cover up the source of funds by using casino accounts, betting points, and cryptocurrency assets to cycle bets, disguising the illicit money as "profits" or "business income," significantly increasing the difficulty of law enforcement.
The United Nations Office on Drugs and Crime warns that this casino money laundering network intensifies the scale of fund transfers, increasing the difficulty of tracking. The Triads also use international trade routes, laundering money through shell companies purchasing high-priced goods for export, increasingly relying on cryptocurrency to increase the anonymity of trade payments.
The report also reveals that 97% of Chinese manufacturers of fentanyl and methamphetamine precursor chemicals accept cryptocurrency payments, allowing the Triads to use crypto assets to purchase drug ingredients, building a closed loop of drug production and money laundering.
Additionally, Mexican drug cartels cooperate with Chinese underground banks, using a "mirror exchange" system to swap the value of dollars and yuan through cryptocurrency, completing massive drug fund transfers.
The North Korean government-supported hackers steal billions of dollars in crypto assets, relying on Chinese underground banks and over-the-counter brokers to launder funds, supporting nuclear weapons and military procurement. The report also points out that Chinese networks assist Russia in evading international sanctions, providing a financial pathway for its military transactions.
TRM Labs emphasizes that with the advancement of cryptocurrency technology, these underground money laundering networks are becoming more covert and efficient, posing unprecedented severe challenges to global law enforcement agencies.
