Chinese o-crime is driving the money laundering problem.

IT IS RARE these days for America and China to co-operate on anything. As The Economist went to press, America's secretary of state, Antony Blinken, was on a trip to China, in part to press his hosts to stop sending weapons-related materials to Russia's defence industries. He will be lucky to get a polite smile. So it is noteworthy that the two countries have recently decided to boost mutual support in another domain: the fight against money-laundering . This month they launched a bilateral forum to discuss the problem. Unlike Russia, it is a big one for both of them.

The menace has grown in recent years, fuelled by underground Chinese networks equipped with new technologies that can enable dirty money to be washed clean in minutes. For transnational criminal gangs, these shadowy "banks" are becoming the financiers of choice. Suppressing them requires the two great powers to talk. Amid their political rancour, discussions about money-laundering had been on ice for years. Their resumption marks "a big change, a big positive change", says an official from America's Treasury Department.

In America the threat is a matter of life and death. In the 12 months to November 2023 more than 105,000 Americans were killed by overdosing on drugs, mainly fentanyl and other synthetic opioids smuggled into the country from Mexico. Chinese underground banks play a crucial role in this by enabling Mexican cartels to launder their proceeds swiftly and at low cost.

In a paper published in 2021 by the American Intelligence Journal, Virginia Kent of the State Department and Robert Gay of the National Intelligence University in Maryland wrote of a "bloodless coup" by Chinese money-handling organisations, noting how, in recent years, they have largely displaced home-grown ones in Mexico. The authors called these Chinese operators "a new and more challenging money-laundering foe".

The American government has been sounding the alarm. In its "National Money Laundering Risk Assessment" of 2022, the Treasury Department highlighted the involvement of Chinese illicit finance, saying that drug-traffickers were making increasing use of it. The department's latest such report, published in February, said that Chinese organisations had since become "more prevalent" and were now among the "key actors" laundering money around the globe. American officials hope that the new money-laundering forum, along with another launched by America and China this year to tackle drug-trafficking, will help fight them.

Other authorities have been chiming in, too. In 2019 Europol, the EU's police agency, said money-laundering by Asian criminal groups, particularly Chinese ones, presented a "growing threat to Europe". It called the Chinese gangs "extremely flexible", saying they were handling "substantial proceeds" from a variety of criminal activity. In January the UN Office on Drugs and Crime (UNODC) reported on a "revolution" under way in South-East Asia's "underground banking architecture", involving everything from casinos to cryptocurrency. The details it provided suggested that Chinese gangs were at the forefront.

China's anxiety is evident, too. It worries about the conduit provided by underground banks for evading the country's strict foreign-exchange controls (capital flight, even by legitimate means, is a persistent headache: see chart). Mainland Chinese are not allowed to send more than $50,000 a year out of the country. For many rich Chinese, that is far from enough.

Chinese often turn to illicit financiers not to launder cash, but to move some of their wealth abroad. Such demand is only likely to grow as China's economy falters. Some of these people are criminals, including corrupt officials who want to park their ill-gotten gains beyond the reach of China's police. They have cause to be nervous: China's leader, Xi Jinping, has been waging a war against graft. In 2022 the chief prosecutor's office said anti-money-laundering efforts were part of "a major national strategy for maintaining the country's political and financial security". According to state media, China is working on the biggest changes to its anti-money-laundering law since it came into force in 2007.