Analysis of Businesses at Risk of Money Laundering and Organized Crimes: Case Study of Chinatown in the U.S.

Abstract

This research examines the types of businesses used by organized criminals in Chinatown, and the evidence of financial crimes such as money laundering risk indicators displayed by these businesses. We examined 80 businesses in Chinatown in the U.S. advertised between January 2023 and April 2023. The data allowed for the identification of key businesses vulnerable to money laundering and organized criminals in Chinatown. According to the analysis, criminals may use certain types of businesses such as immigration consulting companies, employment agencies, financial services, and business leaders to hide their illicit activities and generate illicit proceeds. The results illustrate the weaknesses in the current anti-money laundering regulations surrounding regulated entities as well as the evolving methods that organized criminal networks are adopting to become high-profit enterprises that expand their operations in increasingly sophisticated ways. The present study contributes to earlier research exploring the money laundering techniques used by organized criminals in Chinatown and makes recommendations to strengthen the global fight against financial crimes.

1. Introduction

The purpose of this Chapter is to contribute to the existing topic on the methods of money laundering that criminals use in Chinatown and to provide recommendations to strengthen the global effort against financial crimes. The Chapter highlights the most common money laundering methods used in the business sectors previously identified as those operated by the criminals in Chinatown [1]. By pinpointing networks of businesses susceptible to money laundering activities, this chapter aims to uncover methods employed by organized criminal networks in Chinatown. This understanding is essential to expose their money laundering methods, ultimately leading them to highly profitable enterprises.

Money holds a significant place in our society as they can be a powerful motivator for people to engage in criminal behavior [2]. Unfortunately, for some individuals, criminal activities are seen as a way to acquire wealth [3]. Many criminals launder illicit proceeds to hide the link between their crime and the profits gained. This promise of anonymity offered through the process of money laundering holds a significant appeal to potential offenders, especially when it comes to concealing the source of their wealth, which can be used as evidence against them and result in the confiscation of their assets [4]. While money laundering was initially associated with drug trafficking, it is now recognized in most criminal justice research that the practice is linked to almost all criminal activities that generate income. For example, organized criminal networks [5, 6], tax evaders [7], as well as art dealers [8], commit money laundering to hide their criminal proceeds.

Money laundering is a constantly evolving criminal practice with new methods emerging over time [9]. It involves a series of deliberate activities aimed at masking the origin of illicit gains to make them appear to have come from legitimate sources [10, 11]. Money laundering enables criminals to avoid the scrutiny of law enforcement agencies that come with sudden wealth acquired from illegal activities [4]. This practice of money laundering has contributed to the growth of various types of crime. According to the United Nations Office on Drugs and Crime, approximately 2–5 percent of the world’s gross domestic product (GDP), equivalent to $800 billion to $2 trillion in US dollars, is laundered worldwide each year [12]. Criminals often use a three-phase transition model known as placement, layering, and integration to disguise their illegal profits as legitimate income. This concept has been widely discussed in literature by various authors. For example, see [13, 14, 15, 16].

According to [16], the process of money laundering involves three phases. The first phase is placement, which involves introducing the illegally obtained funds into the financial system. This can be done through cash deposits or purchasing financial assets like prepaid cards [17]. The main objective is to transfer the illicit funds to specific accounts and locations that aid easy integration into legitimate financial systems. The second phase is layering, which involves transforming the illegally obtained funds that have been placed in the financial system. An example of layering technique includes a series of financial transactions, such as transferring funds to different accounts in various locations around the world [18]. The primary objective of layering is to make it difficult to trace the funds’ origin and trail. The third and final phase is integration, which is the process of reintroducing the successfully layered funds into the legal economy through various forms of investments in business ventures, assets, or real estate acquisition [19].

In recent years, the role of certain professionals in the legal, financial, and accounting professions as potential accomplices in the act of money laundering, has continued to attract focus by various jurisdictions law enforcement agencies and nongovernmental organizations such as FATF [20]. Notably, the FBI’s renewed focus on investigating professionals, such as brokers, accountants, and lawyers, underscores the importance of addressing the global threat posed by illicit funds traversing international borders [21]. The UK national risk assessment report for 2017 also emphasized the pivotal role of professional services as a gateway for criminals to obscure the origin of their funds [22]. These professionals’ services are often sought by clients when executing trade-related transactions through property purchases, shell company formation, bank accounts opening and other types of assets acquisition dealings.

The complex and varied nature of professionals’ involvement in money laundering is evident in [20] research. [23, 24] have shed light on legal practitioners’ involvement in money laundering cases, emphasizing the need for good practices to mitigate the risk of abuse. Similar work focused on English and Wales solicitors by [24] suggests that some legal practitioners occasionally provide professional assistance to organized criminal groups (OCG) to facilitate money laundering and this conclusion was made based on evidence from the reoccurring high number of solicitors being persecuted for the act of money laundering related crimes annually. While [25] demonstrated that criminals seek out professionals’ accomplices only at the point to integrate the criminally acquired wealth into the legitimate economy because they act as a facilitator. That is an outsider whose expertise is contracted by the criminal to solve logistic bottlenecks.

The vulnerability of professional services to criminal exploitation, whether as willing conspirators or innocent bystanders, has recently faced heightened scrutiny [26]. Academic scholars and law enforcement agencies have called for a more stringent regulatory regime, particularly targeting professionals such as lawyers and real estate agents who serve as intermediaries facilitating the clandestine flow of money [27]. This chapter aims to contribute to the ongoing discourse by examining the vulnerabilities of professional services, particularly in immigration consulting firms, financial service sectors, employment agencies, nonprofits or business association memberships to criminal exploitation. Amidst growing demands for more rigorous regulatory measures concerning businesses vulnerable to money laundering, this research aims to delve into the nuances of professionals’ engagement, their susceptibility, and the potential money laundering methodologies employed by suspected criminal networks in a specific Chinatown location in the US.

This Chapter is outlined as follows: Section 2 undertakes a comprehensive review of existing literature on money laundering, highlighting specific cases of businesses at risk of criminal networks in Chinatowns globally. In doing so, the most common and vulnerable businesses to criminal network are identified and used as a guideline to explore the intricacies of professionals’ involvement, their susceptibility, and potential money laundering methodologies employed by suspected criminals’ network in a particular Chinatown in the US. Section 3 presents the analyses of the suspected criminal business models in a particular US Chinatown. Finally, Section 4 concludes the Chapter by discussing the findings in relation to the original Chapter objectives, implications for research and practice, potential limitations, and suggestions for future research.

2. Exploring money laundering: Causes, impacts, and business perspectives

Money laundering persists as a global phenomenon, prompting questions of how it continues to thrive. The literature on combating money laundering presents inconsistent findings from different authors. Some research [28] suggests that the lack of international coordination hinders the efforts to combat money laundering. On the other hand, a study [29] found that international collaboration in the fight against money laundering has been successful in the past decade. The study emphasized the need for greater attention to cultural and historical differences when developing strategies to combat money laundering. However, other research [30] criticizes globalization for enabling money laundering by providing opportunities for free-market capitalism with easier access to international financial systems by criminals. These findings highlight the need for continuous evaluation and improvement of anti-money laundering (AML) programs, which are measures aimed at preventing the integration of illicit proceeds into the economy.

The Financial Action Task Force (FATF) has also expressed concerns about the challenges that countries face in enforcing their national laws in a borderless commercial environment, as trade and communications become increasingly globalized [31]. It is worth noting that a nation’s AML regulatory framework and the nature of its financial system are heavily influenced by cultural factors [32]. As highlighted in a study [9] on the laundering of cybercrime proceeds, there are vulnerabilities in the international financial system that are being exploited to launder proceeds obtained from illegal activities. [33] suggested that competitive pressures, shareholder returns, and misaligned incentive structures for management as the main contributors to the vulnerability of financial institutions to money laundering.

The global regulatory response to money laundering has been a subject of contention. Some criticized that the inadequacy of the global regulatory response has contributed significantly to the rise in money laundering crimes [34]. Money launderers often try to hide the origin of their illicit income and the illegal activity [35], by exploiting vulnerabilities in the financial system [9, 36, 37]. The United Nations Office on Drugs and Crime (UNODC) estimates that between 2 and 5% of global GDP—up to 1.87 trillion Euros—is laundered each year [38]. Recent reports, such as those from the European Union Agency for Criminal Justice Cooperation, highlight a steady increase in money laundering cases since 2016, constituting nearly 15% of all cases registered at the agency between 2016 and 2021 [39]. However, due to the elusive nature of money laundering risk [40], it is difficult to measure the global scale and the values provided are only estimates.

Criminals can employ various money laundering techniques, such as money mules (people who assist in transferring funds on behalf of third parties using their own personal identities for commission) [41], or information technology-enabled channels like virtual currencies [42], to obscure the connection between their crime and the illicit gains. These techniques frequently offer varying degrees of anonymity when concealing illicit proceeds [43]. Some cases show that tracing criminal proceeds is reasonably manageable. However, it becomes problematic when criminals employ ‘shell’ companies or professional services, including employment agencies, financial services, or immigration firms, to facilitate money laundering [1]. The engagement of criminals in illicit activities within Chinatowns worldwide through these forms of businesses is evident in numerous cases, as highlighted in the following examples in Section 2.1.

2.1 Susceptible businesses to criminal networks in Chinatowns worldwide

This section sheds light on businesses at risk of money laundering by criminal networks linked to immigration consulting firms, financial service sectors, employment agencies, and business associations. In 2021, [44] reported that Sunny Wang’s immigration consulting firms provided fraudulent permanent residencies to at least 1600 Chinese individuals using fake passports, addresses, and phone numbers. Similarly, during the 1990s, more than 200,000 Hong Kong residents immigrated to Canada [1]. Examining the 1990s migration boom from Hong Kong to Canada, authorities uncovered a significant presence of Asian criminal networks, including a high-ranking member of the Sun Yee On syndicate involved in a Quebec immigration investment scheme. These criminal networks were found to have connections with public service officers. For instance, an immigration lawyer was charged with fraud and forgery related to Hong Kong visa applications. In Taiwan, an immigration consulting firm exploited a fake Canadian visa scheme as part of an investment scam [1].

Recent cases in 2023 exposed an attorney and his team aiding Chinese migrant workers in fraudulently obtaining asylum status in the U.S. by fabricating persecution histories, including false claims of gender minority membership [45]. Another instance from 2018 implicated 30 immigration lawyers in helping over 3500 immigrants, primarily Chinese, secure fraudulent asylum status [46]. These criminal schemes extended to employment agencies, implicating the exploitation of migrant workers globally. An example involves an employment agency accused of exploiting Hispanic workers by making false promises of high paying jobs while subjecting them to long hours of work for meager compensation [46, 47]. Similarly, in 2014, two Chinatown employment agency owners in Texas were arrested for trafficking Hispanic workers to multiple restaurants nationwide, involving grueling working conditions without proper compensation and training for occupational safety [48].

In 2021, [49] reported that a Chinese job recruitment agency was accused of labor trafficking hundreds of Vietnamese men in Serbia. The agency offered promises of better-paying jobs. However, upon arrival, workers faced low pay, inadequate meals, and substandard living conditions without heat or hot water. These cases underscore the need for increased scrutiny and regulatory measures to protect vulnerable individuals and businesses worldwide. The financial services sector, too, has been both operated and exploited by Asian criminals globally [1, 50, 51, 52, 53, 54, 55, 56, 57]. Notable cases include Eddie Chan, an executive director of a major criminal organization, Leung Tong, opening a private bank in Chinatown [50]. Similarly, in 2019, a Chinese Triad member and his network were discovered moving millions of dollars in drug proceeds among Chinese banks worldwide [53].

In another instance, the Agricultural Bank of China New York branch faced a $210 million fine in 2016 for violating anti-money laundering regulations [54]. Also in Spain, the bank regulatory authority fined the Industrial and Commercial Bank executives of China’s Madrid branch for transferring 225 million euros to China for a Chinese criminal network [55]. In 2023, Australian federal police apprehended seven individuals associated with a Chinese criminal organization involved in laundering $143 million through the Changjiang currency exchange, a prominent remittance service in Australia [56]. Also highlighted in [50] work is the significant influence of major criminal groups on local politics in most Chinatown in the U.S. The work identified Edmund Ho, a member of the Chinese Triads, exerting substantial control over local business associations and politics in Chinatowns. Historical records from 1986 revealed the use of registered associations by triad members as temporary casino sites for illegal gambling [50]. A 2017 report exposed Chinese organized crime members and businessmen utilizing nonprofit-oriented businesses to channel bribes to United Nations officials [1].

Money laundering stands as a formidable threat to key businesses worldwide, rendering them susceptible to exploitation by criminal organizations. Our comprehensive literature review has unveiled a pattern where criminal groups, adopting various guises, exploit business association leaders, financial institutions, employment agencies, and immigration consulting firms across the globe. In light of these insights, our study explores businesses particularly vulnerable to exploitation by criminal networks, with a specific focus on immigration consulting firms, business association members linked to immigration firms, financial service sectors, and employment agencies in a designated U.S. Chinatown location. By horning in on these specific sectors, we aim to contribute to the ongoing discourse on targeted risk mitigation strategies and interventions in the realm of money laundering prevention.

3. Analyzing criminal business models in a U.S. Chinatown

Criminals often engage in a chain of deception to conceal the money they earn from illegal activities [58]. In doing so, they establish various businesses engaging in different activities. Such businesses often falsely project activities that they are not genuinely involved in, which suggests a deliberate attempt to mislead or create a facade. Establishing a link between deceptive advertising and money laundering requires a multidimensional approach, involving financial analysis, industry understanding, regulatory compliance checks, and collaboration with relevant authorities’ records. Our analysis begins by using data analytics and technology to identify unusual patterns in advertising data and financial transactions. We examine randomly sampled Chinese language online advertisements for businesses operating within a specific Chinatown location in the U.S. Our objective is to identify any discrepancies between the advertised business operations and their actual functions in Chinatown in the United States.

We conducted a search for businesses in a designated U.S. Chinatown using Google search, employing specific key terms in Chinese derived from our literature review. Table 1 provides an overview of the search terms, corresponding outputs, and the number of cases analyzed. The result of the search generated a list of 80 businesses, which were extracted and subjected to further analysis using the FATF money laundering risk guidance document [31, 59]. Following our initial filtration of 80 entities, we noted 38 of them with some disparities between the actual business activities identified through the use of Google Maps. Out of the 38 entities further reviewed, 32% (12) were connected to immigration consulting firms, 21% (8) connected to employment agencies, 47% (18) were financial institutions (such as; remittance, money transfer, and bank)reveals. In our methodology, we employed a multistage stratified sampling technique [60, 61] to thoroughly examine the selected spooled reports for potential signs of suspicious money laundering activities. To enrich our analysis, we gathered supplementary information from public sources, including opencorporate.com, truthpeoplesearch.com, and other background search data sources, to acquire additional details about individuals and their business connections associated with each of the businesses under scrutiny. Utilizing addresses and phone numbers provided in online business advertisements, we identified the individuals, corporations, and their affiliations with the sampled businesses. Subsequently, we conducted a comprehensive examination of corporate filings and property records pertaining to these individuals, their family members, affiliates, and both their current and past addresses.

S/No	Chinese terms	English translation	Category in our analysis	Number of entities from search	Number of entities analyzed	Number linked with suspicious activities
1	汇款服务	Remittance	Financial Institutions	11	11	1
2	汇款	Money Transfer and financial services		20	20	14
3	银行	Bank		21	21	3
4	职业介绍所	Employment Agency	Employment Agencies	11	11	8
5	移民咨询	Immigration Consulting	Immigration Firms	17	17	12
Total				80	80	38

Table 1.

Google search terms and outputs.

In our methodology, the multi-faceted approach was designed to offer a comprehensive understanding of potential money laundering activities within the selected businesses. We accomplished this by juxtaposing observed business operational activities with the indicators of money laundering outlined by the FATF [31, 59]. By aligning our findings with the FATF list, we aimed to identify any congruence or deviation from established indicators, thereby enhancing the reliability of our assessment of potential money laundering activities. This systematic comparison allowed for a more nuanced and context-specific analysis, contributing to the robustness of our investigation into the financial activities of the selected businesses.

The analysis reveals several indicators of involvement in money laundering activities, including anonymous ownership of corporations, use of P.O. Box addresses, complex business structures, specific types of business associations, professional money laundering indicators, use of straw buyers, fraudulent loans, corporate property ownership, mortgage fraud, and involvement of private banks. Mass registrations and inappropriate business addresses were common anomaly identified in this study. The mass registration addresses within industrial complexes may be indicative of attempts to create an intricate web of entities making it challenging to trace the flow of funds. For example, 29% (11) of these 38 identified entities were registered at mass registration addresses within industrial complexes, with no identification of specific unit. The lack of specific unit identification makes it difficult to verify the legitimacy of these entities. It becomes challenging to ascertain the actual business operations, ownership, and the purpose for which the entity was established.

Further analysis indicates that the business phone number identifiable with some of these entities were also utilized by many other Limited Liability Companies (LLCs) registered companies. In fact, one of the business owner’s home addresses was linked to 164 registered cash-intensive businesses address (e.g., grocery, fashion, wholesale, buffet restaurant, property management, CPA firm, automobile company, travel agency, construction, nail salon, jewelry business, hair salon, law office, acupuncture, real estate and more). Entities registered in such a manner may be at a higher risk of being used as shell companies. Shell companies can be exploited for illicit activities, including money laundering, as they provide a veil of secrecy regarding the actual beneficiaries and operations [62, 63].

According to our analysis, 50% (4) of the employment agencies exhibited intricate corporate structures, suggesting potential complexities in their business operations. One of these agency’s business filing involved an LLC corporation with an Eastern European female as a registered agent, although the associated phone number belonged to a different Chinese woman. In another instance, the review of the business filings indicates a connection to a realty management company, yet the company’s address was at a hotel building.

The scenarios described raise concerns about the legitimacy and accountability of these entities. Subsequently, detailed findings regarding each analyzed business type are presented as follows.

3.1 Immigration firms

A number of immigration firms have been previously linked to illegal activities, including human trafficking, trade-based money laundering, tax fraud, and the reinvestment of illicit proceeds [1, 64]. This study identified six immigration firms exhibiting indications of financial crimes, with 83% (5) of them operated by individuals with Chinese names. Of these firms, 50% (3) of the immigration firms were linked to locations characterized by mass registration address. Notably, some of these businesses had brief operational lifespans, with at least two opening and closing within a five-month period, and six remaining active for less than two years. Short-lived businesses may be more prone to engaging in illicit financial activities due to the transient nature of their operations, making it easier for them to conduct fraudulent transactions, obscure financial trails, and evade detection [65]. Also, brief operational lifespans can be indicative of a strategy employed by businesses to exploit legal and regulatory gaps for tax avoidance or evasion purposes [66, 65]. In another notable case, one immigration firm owner was associated with 164 cash-intensive businesses (all these entities were registered under the owner’s home address), spanning diverse sectors such as grocery, fashion, buffet restaurants, and real estate. Cash-intensive businesses, by nature, deal predominantly in cash transactions to make it easier for illicit actors to disguise the conceal their illicit proceeds. Cash-related transactions often offer significantly high levels of anonymity; hence it remains a prominent feature of criminals’ enterprise payment systems despite the evolving landscape of criminal activities and the rise in cybercrime [67].

Our analysis indicates that 83% of immigration firms (five out of the total six firms) share phone numbers with individuals linked to multiple limited liability companies across diverse industries, including real estate, art management, restaurants, technology, fashion, production, marketing, sportswear, salons, jewelry services, tax services, hair salons, grocery stores, acupuncture services, construction, nail salons, kitchen supply wholesale companies, cafés, sewing or tailor shops, and others. The use of a single phone number by multiple businesses or entities can be indicative of potentially illicit activities [68]. It may raise concerns over the transparency and legitimacy of the businesses associated with that phone number. This practice is sometimes observed in situations involving fraud, scams, or other illicit operations where individuals or entities attempt to conceal their identity or engage in deceptive practices [68].

The findings raise concerns about the potential involvement of these immigration law firms in trade-based money laundering and various illicit activities, including tax evasion or fraud within Chinatowns in the U.S. The identified risks underscore the need for thorough and comprehensive measures to address vulnerabilities within the immigration legal service sector. The susceptibility of immigration firms to engage in illicit financial activities, as revealed by the study, emphasizes the importance of regulatory scrutiny and targeted interventions to safeguard against the potential misuse of these entities for criminal purposes. By recognizing these vulnerabilities, policymakers and regulatory bodies can work towards creating a more resilient and secure environment within the immigration legal service sector, contributing to the overall efforts to combat financial crimes in Chinatowns and beyond. The next subsection presents the findings on employment agencies.

3.2 Employment agency

Businesses engaged in labor exploitation, human trafficking or wage theft, like many criminal enterprises, often resort to financial crimes to conceal their proceeds [46, 69]. Among the 38 entities analyzed, 21% (8) were identified as employment agencies displaying indicators of money laundering activities. Of these 8 agencies, 5 were operated by owners with Chinese names, with one each with Korean, Japanese, and Eastern European name. These companies also exhibited incongruities between the stated business activity and the address provided. For example, one employment agency’s owner operated a consulting firm with an address in an apartment complex. Another agency exclusively advertised services in Chinese online, with an unclear physical location, while the owner also managed a youth hostel in another state, registered at a residential property. Another agency’s address, listed as a physical therapy business on Google Maps which showed an unclear address of the actual location.

Further, 50% (4) of the employment agencies demonstrated a complex corporate structure. In one case, the business filing featured an LLC corporation as a registered employment agency, represented by an Eastern European name, yet the phone number was associated with different person from China. LLCs are business structures that offer a flexible and relatively simple way to organize and operate a business [70]. While many LLCs operate legitimately, the structure also presents certain characteristics (e.g., limited disclosure requirements, ease of formation, nominee members), that can potentially be exploited by money launderers. We have concerns that this entity may intentionally have adopted a different identity to conceal illicit activities. In another instance, an employment agency’s business filing indicated an LLC corporation as the process agent, while the agency itself was linked to a realty management company with an address at a hotel lacking a website or online presence.

Similarly, four (4) agencies were tied to Delaware corporations with anonymous ownership, and two (2) of which had connections to individuals with P.O. Box addresses, which are commonly used to protect anonymity [71, 72, 73]. Delaware corporations are known for concealing beneficiary ownerships of criminal assets, and past reports, including State v. Xing Ying Employment Agency (2018) and Arriaga (2018), have implicated employment agencies in Chinatown in criminal activities [47, 74, 75]. Out of all the entities investigated, 50% (4) had owners registered at the addresses suggesting either mass registration or P.O. Box addresses. For instance, one employment agency’s phone number was linked to a Japanese name. The individual’s age remains unknown, cohabiting with four individuals with South Korean names at a shared address. Intriguingly, one of these South Koreans is linked to three LLCs, connected to P.O. Box, a commercial building, and a residential property. This intricate network of linked businesses presented in Figure 1, raises concerns about the transparency and legitimacy of their operations, warranting a closer examination of their financial activities to mitigate the associated risks of money laundering. The next subsection presents the findings on financial institutions.

Figure 1.

Employment agency network.

3.3 Financial institutions

According to our review, there were a total of 18 online advertisements for financial institutions such as banks or money transfer services. Out of these 18 advertisements relating to financial institutions, 14 were money transfer services, 3 were banks, and 1 was a remittance service. We found that 50% (9) of the 18 entities showed signs of trading activity that were inconsistent with their stated line of business. One of the entities, for instance, advertised itself as a financial institution, but it was in a beauty and spa equipment supply business. Another entity advertised itself as a money transfer service, but the location was based in a pharmacy and grocery store. One business was also found during the search of remittance service in Chinese language, but the location was in an apartment complex, and it was advertising itself as “a good business” in Chinese language with no English title.

In this study, the analysis of firms classified under the financial institution category revealed that the business activities of 5 out of the 18 entities were not appropriate for the stated address. In the illustrated scenario, Figure 2 reveals a network where Person A, owning a bank, is linked to Person B, operating a tourism business. Person B shares an address with Person C, who manages a private bank and an asset management company, utilizing multiple aliases or identification information. Person C, in turn, shares another address with Person D, overseeing an apartment property management company, an investment company, and three additional LLCs. Further analysis unveils intriguing connections. As illustrated in Figure 3, another bank owner, identifiable by a Japanese name, is associated with at least seven businesses. Two of these businesses are linked to grocery stores that sell imported goods from Japan in a different state, along with a confectionery company and three LLCs registered in that state. Notably, the grocery store registered under the same owner’s name is located at an apartment complex in another state. Interestingly, property records indicate that the apartment is sold annually, yet the same owner remains associated with the address during those transactions. This complex web of relationships raises questions about the nature of these connections and potential illicit business practices.

Figure 2.

Financial institution network.

Figure 3.

Financial institution ties with real estate network.

In another intricate scenario, a remittance service, marketing itself as “good business” in Chinese, lists the business address as an apartment complex residence, hinting at potential discrepancies. The same business was linked to a bank, pivotal in various property transactions linked to investors behind Chinese and Korean brothels owned by individuals operating multiple LLCs, including a property management and renovation company, a real estate company, and a restaurant. Notably, the restaurant’s address is traced back to a residential property, adding a layer of complexity. Further, the analysis of 18 financial institutions also indicated that some of the owners either utilize mass registration addresses or have connections with entities registered at such addresses. For instance, one bank’s address is associated with several individuals, one operating a packing company and another with a P.O. Box address. Another bank is connected to a restaurant and several investment or real estate companies, with at least one person linked to the bank owners having a P.O. Box address. The web of connections extends to family relationships. The wife of one bank owner shares an address with 10 other individuals with Chinese names. Intriguingly, one of these individuals is connected to 13 LLCs, spanning real estate, logistics, trucking, and a restaurant.

In another instance, the phone number of one of the financial institutions was linked to 12 individuals. Of these 12 individuals, one owns an investment company, and another operates a printing company, another two of the individuals, maintained P.O. Box addresses with limited information available to the public. Ironically, this entity features prominently in multiple property records associated with brothel owners with Chinese or Korean names, exacerbating the layers of suspicion and prompting a closer examination of the financial activities within this complex network.

3.4 The networks of the business association leaders

This study undertook a comprehensive examination of seven leaders affiliated with a business association, focusing on property records and business filings for six of them due to the unavailability of online information for one leader. Aligning with concerns raised by [74] regarding organized criminal activities among business association leaders, this investigation delved into individual business leaders’ records, revealing compelling indicators of potential money laundering activities that substantiated [74]’s observations. The study revealed that five out of the six leaders utilized monetary instruments for property purchases and were heavily involved in the real estate businesses; and two leaders operated construction companies. At least two leaders were affiliated with students with Chinese names who purchased properties worthy over $700,000 in cash. As pointed out by [74] and [1], these raise concerns over whether some leaders work with Chinese students to launder illicit proceeds from China to the U.S. The diversity of the businesses operated by these leaders spanned a wide spectrum, including hotels, immigration consulting firms, grocery stores, investment companies, restaurants, and art trading businesses. The intricate web of affiliations led to the operation of a total of 73 limited liability companies, ranging from three to 25 businesses affiliated with each of the business leaders reviewed. Examining the profiles of business leaders also revealed noteworthy patterns. For example, one of the leaders had no direct residential or commercial property ownership under his name but was linked to addresses within apartment complexes at a commercial building. However, he operated a Chinese art trading company and multiple commercial real estate businesses while holding a board position in a prominent nonprofit organization advocating for a political cause in Chinatown.

The study’s findings indicated that 50% of business leaders utilized corporate vehicles in real estate transactions. For example, one leader purchased a property for $2 million in October 1999, only for a realty company owned by the same leader and his brother to acquire the property later for $480,000. Another leader, in a separate instance, purchased a property for $3.3 million in cash in July 2004, then subsequently transferred the ownership to the LLC in December 2005. Another leader, engaged in the ownership of a massage parlor or spa in another state—a business often exploited by human traffickers—caught attention. The associated business address was connected to another enterprise with a different name advertised online. Upon further scrutiny, it was found that after the massage parlor business was incorporated, ownership was transferred to foreign nationals who had made the property purchase with cash, lacking U.S. social security numbers or identification. After the closure of the massage parlor, the property title reverted to the initial business leader’s spouse’s name, with a price reduction of $10,000 from the original purchase amount. Remarkably, despite operating multiple commercial real estate companies, the same leader had no direct residential or commercial property ownership under his name but possessed luxury goods, including a yacht and high-end vehicles—the items and sectors often susceptible to financial crimes.

In another intriguing case, a Chinatown hotel owner engaged in a series of cash transactions totaling $910,000 with a seller and their family. Three months later, the property was sold for $880,000 to one of the business leaders. Ironically, the same hotel owner also faced negative publicity for violating employment rights of his hotel staff. His business record analysis revealed that he retained at least 53 LLCs opening and closing within a few years in multiple states. Similarly, a different leader acquired a property for $2.7 million in cash, later transferring ownership to another LLC under the same leader. These cases underscore the diverse and complex strategies employed by business leaders in Chinatown, emphasizing the need for a nuanced understanding of their potential criminal activities, including financial crime.

Moreover, the study identified affiliations with private or regional banks with suspicious business structures, indicating potential collaborations with these institutions for mortgage transactions. Several instances pointed to associations with individuals engaging in questionable business models, such as opening and closing limited liability companies within a short timeframe, businesses with a smaller bank with a website no longer in existence, and involvement in nonprofits, shopping plazas, and other private banks. While some cases did not fit conventional indicators outlined by the FATF, they presented distinctive red flags. For instance, a reviewed bank was associated with businesses engaged in the sale of imported goods and real estate transactions, showcasing potential money laundering activities. Another bank’s connection to a restaurant, which was in operation for only 14 months, hinted at potential tax evasion or fraud activities.

This comprehensive analysis underscores the importance of vigilant scrutiny and investigation into the financial activities of business leaders, especially within complex networks where potential money laundering activities may be concealed through diverse business operations and transactions.

4. Conclusions

The primary goal of this Chapter was to contribute to the ongoing discourse by examining the vulnerabilities of professional services, particularly in immigration consulting firms, financial service sectors, and employment agencies, business association leaders to criminal exploitation. Linking deceptive advertising activities to potential instances of money laundering in a U.S. Chinatown location, we scrutinize advertising content for inconsistencies or anomalies between what was advertised and the actual operations of the company. Considering the analysis of 38 sample advertisements, their business filings, and business associates, we draw the following conclusions.

First, the analysis reveals several indicators of involvement in money laundering activities, including mass registrations and inappropriate business addresses as common anomaly identified. For example, 29% (11) of these 38 identified entities were registered at mass registration addresses within industrial complexes, with no identification of specific unit. It becomes challenging to ascertain the actual business operations, ownership, and the purpose for which these entities were established. The mass registration addresses within industrial complexes may be indicative of attempts to create an intricate web of entities, making it challenging to trace the flow of funds. For example, one immigration firm owner was linked to 164 cash-intensive businesses across diverse sectors, raising concerns about trade-based money laundering activities. Cash-related transactions, in particular, are known for providing a high level of anonymity. This stands out as a prominent feature of criminals’ enterprise payment systems in this Chapter analysis.

Second, our analysis indicates that 83% of immigration firms (five out of the total six firms) share phone numbers with individuals linked to multiple limited liability companies across diverse industries, including real estate, art management, restaurants, technology, fashion, production, marketing, sportswear, salons, jewelry services, tax services, hair salons, grocery stores, acupuncture services, construction, nail salons, kitchen supply wholesale companies, cafés, sewing or tailor shops, and others. The use of a single phone number by multiple businesses or entities can be indicative of potentially illicit activities [76]. Hence, it raises concerns over the transparency and legitimacy of the businesses associated with that phone number. The practice is also sometimes observed in situations involving fraud, scams, or other illicit operations where individuals or entities attempt to conceal their identity or engage in deceptive practices.

Third, many of the analyzed firms operated as LLCs, a business structure that provided their business owners with opportunities to exploit the vulnerabilities inherent in the LLC structure. These vulnerabilities include limited disclosure requirements, ease of formation, and the potential use of nominee members, which were exploited for potential money laundering purposes. For example, the analysis revealed intricate networks and connections, exemplified by scenarios where bank owners were linked to tourism businesses, private banks, asset management companies, and various LLCs. Notably, complex relationships extended to family connections, with spouses sharing addresses and individuals associated with banks having ties to numerous LLCs. These findings highlight the need for increased scrutiny and regulatory measures to address potential abuse of LLC structures to mitigate the risk of money laundering within these entities.

Fourth, the findings presented in this Chapter appear consistent with earlier research findings evidencing businesses and organized criminals in Chinatown globally. Unlike previous studies that often associated criminal activities with specific cultural or ethnic backgrounds, this study revealed diverse business ownership from various countries while retaining majority of business associated with individuals with Chinese names. Our analysis revealed instances of utilizing corporate entities in real estate transactions, with business leaders engaging in complex ownership transfers and cash transactions, indicating potential signs of professional money laundering. While previous research predominantly highlighted criminal activities by Asian criminals, this study emphasizes the culturally or historically specific choices of businesses, challenging the notion of inherent vulnerabilities in certain sectors. The analysis further identified signs of using professional money launderers (PML) in entities, including two accounting firms, one shell business, and two instances of straw buyers or money mules involved in property purchases. Out of 7 cases with the signs of PML use, 4 of them involved business association leaders, financial institutions and of them were immigration firms. Consequently, we emphasize the need for international authorities to develop cultural-specific strategies that delve into a deeper understanding of criminals’ business models.

Finally, while this study has unveiled significant findings, it is crucial to acknowledge a key limitation. Our analysis primarily relied on comparing business operations with the FATF money laundering risk indicators, rather than being grounded in actual cases of money laundering indictments. This limitation underscores that the identified potential money laundering methods are theoretical in nature, and the study did not directly assess or validate these findings through real-world legal proceedings. Consequently, the study emphasizes the need for caution in generalizing the identified risk indicators to real cases of money laundering, urging future research to incorporate legal outcomes for a more robust and comprehensive understanding of the phenomenon.