The only thing tougher than moving illegal drugs across borders is getting the profits back to Mexico’s cartels, U.S. officials said. Cash is heavy, and transporting it exposes traffickers to lots of risk. Putting it into the banking system is perilous, too. The U.S. and Mexican financial systems have been geared to detect dirty money.
Prosecutors told the court that Gan and his accomplices sidestepped these obstacles by first moving the U.S. cash offshore to China, then on to Mexico. Lim was a linchpin connecting both sides of the Pacific. In her November 2019 plea agreement, Lim admitted to laundering, with Gan and Pan Haiping, about $48 million in drug cash between 2016 and September 2017. She took a 0.5% commission, the agreement said.
Lim testified at Gan’s trial that she had two jobs. The first was collecting drug money in U.S. cities such as Chicago and New York from cartel contacts, typically anywhere from $150,000 to $1 million at a time. She would wait in a public place, armed with a burner phone, a code name and the serial number of an authentic $1 bill. Mexican cartels would pass on her details to their dealer contacts, who would call Lim’s burner phone and use the code name to identify themselves. At the rendezvous point, Lim would give them the $1 bill with the corresponding serial number as a “receipt” to verify the handoff had taken place, Lim said at trial.
Lim’s other job was recruiting businesses in the Chinese diaspora to help them make that cash disappear, Lim and prosecutors said.
Some U.S.-based Chinese merchants have long engaged in off-the-books currency “swaps” to avoid hefty bank fees. Such transactions are illegal in the United States, American authorities said, if they are used by companies routinely to skirt the formal banking system or to operate an unauthorized money transfer business. In some cases these informal, hawala-style transactions are used to help wealthy Chinese move money clandestinely out of China, in violation of that nation’s currency controls.
The operation run by Gan and Pan Haiping grew to include at least three Chinese merchants in New York, who were paid commissions to participate, Lim told the court. The names of the Chinese merchants were not revealed at Gan’s trial, and it’s unclear if they knew of Lim’s links to drug trafficking.
Prosecutors at trial presented testimony, evidence and graphics showing how the transactions worked. At their simplest, authorities said, that process worked as follows: Lim would arrive at one of the merchants with, say, $150,000 in cartel cash. With the businessperson observing, she would open a currency converter app on her smartphone to obtain the exchange rate between the U.S. dollar and the Chinese yuan. She would also hand over the details of a bank account in China given to her by Gan. In what’s known as a “mirror transaction,” the Chinese businessperson would take possession of the $150,000 in U.S. currency while simultaneously transferring the equivalent in Chinese yuan from their own account in China to the bank account number provided by Gan.
The result was that a foreign transfer of funds had been made without involving a U.S financial institution – or the accompanying digital fingerprints. The Chinese business had effectively used yuan from its China-based bank account to purchase cash dollars now on hand in the United States; it earned a commission for its trouble while avoiding bank fees and U.S. government scrutiny.
Meanwhile, Gan had converted U.S. drug dollars into Chinese currency now sitting in a Chinese bank. The only contact with the financial system – a domestic transfer between two accounts in China – would be unlikely to raise red flags with Chinese banking authorities unaware of the money’s provenance.
The crime ring used various Chinese banks for the operations, including the Bank of China, according to WhatsApp messages exchanged between Gan and Pan Haiping. The messages were extracted from Gan’s iPhone by Homeland Security Investigations agents after his arrest, and key excerpts were read out aloud by prosecutors at trial, according to court transcripts.
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“When there is need by the cartels for cash to be laundered, and there is demand for cash from the Chinese, you have a perfect marriage made in heaven,” Im told Reuters. “The Chinese brokers are very important to the Mexican and Colombian cartels.”
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Chinese money launderers are squeezing out Mexican and Colombian rivals by undercutting them on price by as much as half, U.S. officials said. The Chinese operators have been able to do that because they levy fees on both sides of each transaction. They impose fat commissions as high as 10% on Chinese citizens eager to get money out of China. That allows the Chinese money brokers, in turn, to charge traffickers nominal fees of just a few percentage points. The money launderers still turn a handsome profit while locking in a steady supply of coveted dollars and euros from cartel customers.
