Chapter 1: What illicit activities are linked to Chinese money launderers?
One morning in Los Angeles County, a white Range Rover was cruising around, about to make several stops at local banks. The vehicle was being tracked by law enforcement agents.
They set out to find the white Range Rover, which they see from the GPS trackers parked at this bank branch in Artesia, in the city of Artesia.
That's our colleague Dylan Tokar.
Shortly after they get there, they see a man named Jia Yong Yu get out of the vehicle. He's carrying a black backpack. And his first stop is at the ATM machine outside the bank. They can't really tell, but it seems like he deposits maybe a check there. He then walks into the bank, and one of the task force officers is following, you know, behind, trying to look discreet.
The agents were following the driver, Jia Yong Yu, because they suspected he might be laundering money.
They see Yu approach a teller, and he just starts taking stacks of cash bound with rubber bands out of his backpack and putting it on the counter.
Then Yu left, but the agent stayed behind. They asked the bank teller if Yu deposited more than $10,000, anything above that amount is supposed to get flagged by the bank.
And she looks at them and she says, more like $100,000.
By then, Yu was already on his way to another bank, Investigators allege that Yu is part of a new wave of sophisticated money launderers, all with ties to China, who are laundering money for powerful Mexican drug cartels and operating at such a scale and efficiency that it blows traditional money launderers out of the water. Welcome to The Journal, our show about money, business, and power.
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Chapter 2: How are Chinese money launderers connected to Mexican drug cartels?
After that happens, laundering groups like Zhang's are left with a bunch of Chinese yuan, which they use to buy stuff in China and sell in Mexico.
In other words, 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.
What kinds of goods do you see them buy in this trade-based system?
Oh, you name it. I mean, luxury items in some cases, but also just jeans, garments of various kinds, electronics, whatever goods they could sell on the market in Mexico.
That's where China's role in the global economy gives them such an edge because there are so many businesses worldwide, including in Mexico, that are actually looking for Chinese currency and Chinese goods. So that Chinese broker can go to businesses in Mexico and say, I'll give you a good deal on some Chinese currency which you can use to buy goods that you are importing into Mexico.
So this gives Chinese money launderers their advantage.
To really make this system work, though, you can't be shipping around hundreds of thousands of dollars in cash. You need to get that money into a bank.
Money in the bank, in the legitimate financial system, is always more useful than, especially when you get into high values of cash. Like, it just becomes, it's kind of hard. You're always going to look a little specious walking into any sort of business transaction with a bank of cash.
Money launderers have always tried to sneak money into the banking system. But what makes groups like Zhang's different is how reckless they are. Usually, a money launderer would be careful not to exceed the bank's reporting limit of $10,000. But like you heard about at the start of this episode, not these guys.
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Chapter 3: What role does the Chinese financial system play in money laundering?
It really was an incredible effort.
Field agents saw Zhang's associates make trips to houses across the L.A. area, and to banks, too. This brings us back to where we started the story, in the spring of 2023, when agents followed Jiayang Yu in that white Range Rover to a Chase Bank in Artesia, A week later, they were following Yu again and decided to detain him.
This time, they have police officers waiting for him, police officers from Southgate Police Department. So they get Yu to consent to a search. They find bundles of cash in his backpack. Yu says it's about $100,000. They get a canine unit to come do a sniff test. So the dog alerts to the scent of narcotics, so they're able to seize it legally.
You eventually pleaded guilty to one count of conspiracy to operate an unlicensed money-remitting business. A lawyer for you declined to comment. A spokesman for JPMorgan Chase said, quote, Our anti-money laundering monitoring program performed as intended in this case.
As for Zhang, after years of piecing together his alleged money laundering operation, investigators decided in May of 2023 that they were ready to make their move.
One of his lieutenants had gone to New York and was getting ready to board a plane to China. And so we asked the New York authorities to arrest that guy. And because of that, we were concerned that Tsai Chang might also be planning to leave the country. And so we determined that we better arrest him as well.
By this point, the agents had a warrant for Zhang's arrest, and they had attached GPS trackers to cars he used. When they tracked him down, they saw him come out of a house carrying a white grocery bag. Later, they pulled him over for texting while driving and arrested him.
One of the lead task force officers arrives on the scene shortly after the arrest. He reads Zhang his Miranda rights, and Zhang sort of starts to, on his own accord, basically talk. Zhang tells the task force officer that's not drug money, he says, I know a lot of rich people, and I move a lot of money for rich people.
Zhang has pleaded not guilty to money laundering and drug trafficking charges. His case is expected to go to trial next year. In total, 24 people have been indicted following the Fortune Runner investigation. Half of them pleaded guilty. The other 12 were either at large or headed to trial. So you have taken down a part of this operation.
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Chapter 4: How do Chinese money brokers operate in the U.S.?
Get excited. And we've got a little treat for you next Monday. But until then, Merry Christmas, Happy Holidays, and thanks for listening.