The Biden administration is intensifying efforts to trace and disrupt cryptocurrency payments made by Mexican drug cartels to purchase fentanyl ingredients from Chinese chemical companies. This is part of a renewed attempt to tackle the multibillion-dollar fentanyl trade that kills thousands of Americans annually.
Data from private crypto-tracking firm Elliptic shows that transactions for fentanyl ingredients have risen by 450 percent in the last year up until April. As a response, US diplomats are stressing the issue of fentanyl in high-level talks with Mexican and Chinese counterparts. A multi-agency effort is also underway to keep up with the ever-changing nature of how fentanyl is financed and trafficked.
The Drug Enforcement Agency (DEA) is investing in crypto-tracing software and searching for the cartels’ most sophisticated money launderers. The IRS has its tech-savvy agents tracing payments on dark web forums, while a Department of Homeland Security (DHS) investigations unit is leading a team of forensic specialists to inspect digital clues from stash houses near the Mexican border. DHS has ramped up its surveillance efforts in recent weeks.
Two cartels, Sinaloa and Jalisco New Generation Cartel (CJNG), have been identified as the main sources of fentanyl on US streets. Sinaloa Cartel is said to have developed sophisticated crypto operations to finance their fentanyl business.
Cash is still the preferred currency for local operations, but the cartels have switched to digital currency at both the supply and demand ends of the drug trade, reducing opportunities for stakeouts by federal agents.
Cryptocurrency leaves a trail that investigators can follow. For example, DHS agents have monitored a cartel-connected crypto account for over a year, until it sent $200,000 to an accountant used to launder money. Agents are now working to seize the property.
Most of the fentanyl entering the US comes from ingredients made in China. A US indictment in June revealed that just one Chinese chemical company had shipped more than 440 pounds of fentanyl to undercover DEA agents in exchange for payment in cryptocurrency – enough drugs to kill 25 million Americans.
The cartels have a global network of money launderers in dozens of countries, from Thailand to Colombia, known as ‘spinners’. They receive drug money in one type of cryptocurrency and convert it to another to try to obscure the source of the funds.
The Biden administration has sanctioned and secured federal indictments against several Chinese companies allegedly involved in the production of fentanyl. Federal agents are also trying to ‘pinch off the financial flow’ to the Chinese companies, and follow the money trail to the actual supply.
The cartels are said to be heavily investing in technology, and the US government must do the same in order to successfully disrupt the fentanyl trade. With the help of high-tech methods, agents are hopeful that they can eventually ‘get to Chapo Guzman’.
