How a Chinese American Gangster Transformed Money Laundering for Drug Cartels
Sebastian Rotella  and  Kirsten Berg (ProPublica) 12 October 2022
This story was originally published by ProPublica.
 
Xizhi Li pioneered a new method that enriched Latin American drug lords and China’s elite. A Drug Enforcement Administration (DEA) investigation found the Chinese government may have been involved.
 
In 2017, DEA agents following the money from cocaine deals in Memphis, Tennessee, identified a mysterious figure in Mexico entrusted by drug lords with their millions: a Chinese American gangster named Xizhi Li.
 
As the agents tracked Li’s activity across the Americas and Asia, they realized he wasn’t just another money launderer. He was a pioneer. Operating with the acumen of a financier and the tradecraft of a spy, he had helped devise an innovative system that revolutionized the drug underworld and fortified the cartels.
 
Li hit on a better way to address a problem that has long bedeviled the world’s drug lords: how to turn the mountains of grimy twenties and hundreds amassed on U.S. streets into legitimate fortunes they can spend on yachts, mansions, weapons, technology and bribes to police and politicians.
 
For years, the Mexican cartels that supply the U.S. market with cocaine, heroin and fentanyl smuggled truckloads of bulk cash to Mexico, where they used banks and exchange houses to move the money into the financial system. And they also hired middlemen — often Colombian or Lebanese specialists who charged as much as 18 cents on the dollar — to launder their billions.
 
Those methods were costly, took weeks or even months to complete and exposed the stockpiled cash to risks — damage, robbery, confiscation.
 
Enter Li. About six years ago, federal antidrug agents in Chicago saw early signs of what would become a tectonic change. They trailed cartel operatives transporting drug cash to a new destination: Chinatown, an immigrant enclave in the flatlands about 2 miles south of the city’s rampart of lakefront skyscrapers.
 
Agents on stakeout watched as cartel operatives delivered suitcases full of cash to Chinese couriers directed by Li. Furtive exchanges took place in motels and parking lots. The couriers didn’t have criminal records or carry guns; they were students, waiters, drivers. Neither side spoke much English, so they used a prearranged signal: a photo of a serial number on a dollar bill.
 
After the handoff, the couriers alerted their Chinese bosses in Mexico, who quickly sent pesos to the bank accounts or safe houses of Mexican drug lords. Li then executed a chain of transactions through China, the United States and Latin America to launder the dollars. His powerful international connections made his service cheap, fast and efficient; he even guaranteed free replacement of cartel cash lost in transit. Li and his fellow Chinese money launderers married market forces: drug lords wanting to get rid of dollars and a Chinese elite desperate to acquire dollars. The new model blew away the competition.
 
“At no time in the history of organized crime is there an example where a revenue stream has been taken over like this, and without a shot being fired,” said retired DEA agent Thomas Cindric, a veteran of the elite Special Operations Division. “This has enriched the Mexican cartels beyond their wildest dreams.”
 
As they investigated Li’s tangled financial dealings, U.S. agents came across evidence indicating that his money laundering schemes involved Chinese government officials and the Communist Party elite. China’s omnipresent security forces tightly control and monitor its state-run economy. Yet Li and others moved tens of millions of dollars among Chinese banks and companies with seeming impunity, according to court documents and national security officials. The criminal rings exploited a landscape in which more than $3.8 trillion of capital has left China since 2006, making the country the world’s top “exporter of hot money,” said John Cassara, a former U.S. Treasury Department investigator, in testimony to a Canadian commission of inquiry.
 
Adm. Craig Faller, a senior U.S. military leader, told Congress last year that Chinese launderers had emerged as the “No. 1 underwriter of drug trafficking in the Western Hemisphere. The Chinese government is “at least tacitly supporting” the laundering activity, testified Faller, who led the U.S. Southern Command, which oversees military activity in Latin
 
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