DOJ Issues First-Ever Charges Against China-Based Fentanyl Manufacturers and Their Employees

In the ongoing fight against fentanyl trafficking in the Americas, United States authorities have arrested two people and unsealed three indictments against People’s Republic of China (PRC) manufacturers and their employees for supplying chemical precursors to fentanyl. According to the Department of Justice (DOJ), the charges mark the first time the US has sought to prosecute any of the Chinese companies responsible for manufacturing the chemicals used to make fentanyl. 

The DOJ also announced the seizure of enough fentanyl precursor chemicals to “kill 25 million Americans.” This investigation is the latest in a series of stories driving home the complexity of synthetic opioid trafficking. These types of drugs are less geographically bound because the needed chemicals can be manufactured virtually anywhere, rather than relying on a particular climate.

Disrupting the Supply Chain

The seizure of chemicals with such deadly potential is not the first. In April 2021, enough chemical precursors to fentanyl were seized in Canada to produce 262 million deadly overdoses. 

Because of the nature of synthetic opioid production, US Attorney General Merrick B. Garland has emphasized the importance of targeting the trafficked drugs and their whole supply chain, including chemical precursor suppliers and money launderers. DEA Administrator Anne Milgram states, “These companies and individuals are alleged to have knowingly supplied drug traffickers, in the United States and Mexico, with the ingredients and scientific know-how needed to make fentanyl.”

Although authorities in the Americas have long taken all drug trafficking seriously, synthetic opioids like fentanyl pose a severe problem in the opioid epidemic. For Americans aged 18 to 49, fentanyl has become the leading cause of death – the drug being 50-100 times more potent than heroin or morphine.

Fentanyl-Related Charges

Three employees of PRC-based chemical manufacturer Hubei Amarvel Biotech Co. Ltd. – Qingzhou Wang, Yiyi Chen, and Fnu Lnu – were indicted along with the company that employed them on three charges:

• Fentanyl trafficking.
• Precursor chemical importation.
• Money laundering.

The indictments follow an eight-month undercover investigation by the DEA, during which the chemical supplier allegedly shipped around 200 kilos of fentanyl precursors to the US. Per the investigation’s conversation records, the defendants committed to shipping multiple tons of additional precursors even after being made aware that it was causing deaths. During continued meetings with DEA undercover sources, the individuals discussed taking deliberate action to avoid detection by authorities. Currently, only Wang and Chen have been arrested, while Yang is still at large.

A second indictment charged Anhui Rencheng Technology Co. Ltd., Shutong Wang, Shifang Ruan, Xinyu Zhao, and Yue Gao with multiple offenses, including:

• Manufacturing fentanyl.
• Concealing activities through customs fraud.
• Conspiring to distribute fentanyl and butonitazene.

Defendants Hefei GSK Trade Co. Ltd, Hebei Sinaloa Trading Co. Ltd., and Ruiqing Li were indicted with similar charges.

Trilateral Action Against Drug Trafficking

The indictments come on the heels of the recent creation of a North America Trilateral Fentanyl Committee in April 2023. The committee – an alliance formed between Mexico, the United States, and Canada – pledged to “work together to disrupt the global transfer, facilitation, and supply of illicit fentanyl, precursor chemicals, and the equipment (such as pill presses) used in their illicit production” and to “mobilize other countries impacted by synthetic drugs.”

And on May 24-25, 2023, Canada and the United States joined a trilateral workshop reviewing the opioid problem, including fentanyl, and its connection to money laundering, as part of the North American Drug Dialogue (NADD). Founded in 2016, NADD meets annually to address critical issues related to drug trafficking in the Americas.

Key Takeaways

The Financial Crimes Enforcement Network’s (FinCEN’s) 2019 Advisory to Financial Institutions on Illicit Financial Schemes and Methods Related to the Trafficking of Fentanyl and Other Synthetic Opioids remains relevant to firms operating in spaces at risk for financial flows related to drug trafficking. Compliance staff should review its 20 red flags as part of a risk-based due diligence approach. These include:

• Multiple low-value money transfers from a remitter to an individual in China or to several unrelated individuals without a clear legitimate purpose. These may range from $10 to $100 each and add up to around $600.
• Outgoing money transfer volumes inconsistent with typical US remitter activity.
• Multiple deposits into the same account from widely varying locations, combined with activity such as withdrawals in Mexico.
  

FinCEN also asks firms filing a suspicious activity report (SAR) connected to synthetic opioid activity to thoroughly describe relevant activity and reference “FENTANYL FIN-2019-A006” in SAR field 2.