The illicit cross-continental pipeline of fentanyl into the United States has put Chinese and Mexican entities increasingly in U.S. crosshairs.
Late last month, the Chinese Communist Party (CCP) released a statement indicating that it will soon begin to regulate two known fentanyl precursor chemicals, 4-piperidone and 1-Boc-4-piperidone. The U.S. Drug Enforcement Administration designated 4-piperidone as a List 1 chemical in 2023, calling it essential in “the illicit manufacture of the controlled substance fentanyl”; both chemicals were also scheduled by the International Narcotics Control Board in December.
Chinese entities online, however, have openly continued to advertise the sale of those fentanyl precursors as well as others not subject to Chinese government controls. One ongoing seller, Kharon found, was the subject of a U.S. criminal indictment for fentanyl trafficking and money laundering.
The listings offer a window into the origins of the fentanyl production process in China—and provide insights into ways to identify and disrupt the pipeline.
Background: As an alert by the Treasury Department’s Financial Crime Enforcement Network (FinCEN) laid out last year, the supply chain for fentanyl often originates in China, with precursor chemicals and manufacturing equipment that suppliers ship to Mexico. Cartels then use those chemicals and equipment to synthesize the opioids in “clandestine labs” and traffic them into the United States, FinCEN said, including via e-commerce marketplaces.
But the role of e-commerce sites begins much earlier in the fentanyl pipeline.
“A review of just seven e-commerce sites found over 31,000 instances of [People’s Republic of China] companies selling illicit chemicals with obvious ties to drug trafficking,” a report last year from the U.S. House Select Committee on the CCP said. “Undercover communications with PRC drug trafficking companies (whose identities were provided to U.S. law enforcement) revealed an eagerness to engage in clearly illicit drug sales with no fear of reprisal.”
What we found: The U.S. Justice Department indicted the Chinese company Lihe Pharmaceutical Technology Co., Ltd., in 2023 on charges of fentanyl trafficking conspiracy and international money laundering. The DOJ’s indictment said that it “openly advertises the sale of opioids to the United States and Mexico on its website and through its employees,” and Western media has written about Lihe Pharmaceutical in articles related to drug-trafficking organizations and cryptocurrency use in drug trafficking.
But U.S. scrutiny hasn’t curbed the company’s online practices. A recent Kharon review found that Lihe Pharmaceutical remains listed on an e-commerce platform as a seller of fentanyl precursor chemicals, including 1-Boc-4-piperidone. Its website also remains active, though it no longer lists opioids for sale.
Other online sellers of fentanyl precursors might not set off the same alarm bells. Suzhou Kaiyuan Minsheng Technology Co., Ltd., for instance, is a publicly traded biochemical company in China that has received various forms of state backing.
What to watch for: In its June 2024 advisory, FinCEN identified red flags to help financial institutions “detect, prevent, and report suspicious activity” connected to the procurement of fentanyl precursor chemicals and manufacturing equipment.
Vendor activity that advertises the sale of precursors are one red flag; past drug-related convictions are another. Others, FinCEN says, include:
One Chinese company, FinCEN said, was tied to more than 120 international fund transfers through Intercam. They totaled more than $4 million USD.
Read more from the Kharon Brief:
Late last month, the Chinese Communist Party (CCP) released a statement indicating that it will soon begin to regulate two known fentanyl precursor chemicals, 4-piperidone and 1-Boc-4-piperidone. The U.S. Drug Enforcement Administration designated 4-piperidone as a List 1 chemical in 2023, calling it essential in “the illicit manufacture of the controlled substance fentanyl”; both chemicals were also scheduled by the International Narcotics Control Board in December.
Chinese entities online, however, have openly continued to advertise the sale of those fentanyl precursors as well as others not subject to Chinese government controls. One ongoing seller, Kharon found, was the subject of a U.S. criminal indictment for fentanyl trafficking and money laundering.
The listings offer a window into the origins of the fentanyl production process in China—and provide insights into ways to identify and disrupt the pipeline.
Background: As an alert by the Treasury Department’s Financial Crime Enforcement Network (FinCEN) laid out last year, the supply chain for fentanyl often originates in China, with precursor chemicals and manufacturing equipment that suppliers ship to Mexico. Cartels then use those chemicals and equipment to synthesize the opioids in “clandestine labs” and traffic them into the United States, FinCEN said, including via e-commerce marketplaces.
But the role of e-commerce sites begins much earlier in the fentanyl pipeline.
“A review of just seven e-commerce sites found over 31,000 instances of [People’s Republic of China] companies selling illicit chemicals with obvious ties to drug trafficking,” a report last year from the U.S. House Select Committee on the CCP said. “Undercover communications with PRC drug trafficking companies (whose identities were provided to U.S. law enforcement) revealed an eagerness to engage in clearly illicit drug sales with no fear of reprisal.”
What we found: The U.S. Justice Department indicted the Chinese company Lihe Pharmaceutical Technology Co., Ltd., in 2023 on charges of fentanyl trafficking conspiracy and international money laundering. The DOJ’s indictment said that it “openly advertises the sale of opioids to the United States and Mexico on its website and through its employees,” and Western media has written about Lihe Pharmaceutical in articles related to drug-trafficking organizations and cryptocurrency use in drug trafficking.
But U.S. scrutiny hasn’t curbed the company’s online practices. A recent Kharon review found that Lihe Pharmaceutical remains listed on an e-commerce platform as a seller of fentanyl precursor chemicals, including 1-Boc-4-piperidone. Its website also remains active, though it no longer lists opioids for sale.
Other online sellers of fentanyl precursors might not set off the same alarm bells. Suzhou Kaiyuan Minsheng Technology Co., Ltd., for instance, is a publicly traded biochemical company in China that has received various forms of state backing.
- In 2021, the government named Suzhou Kaiyuan Minsheng Technology a “Little Giant” enterprise, marking it as a privately owned company in a key industrial sector that receives state support, such as tax breaks or subsidies, research funding, and mentorship from larger, state-connected firms. China has further accredited Suzhou Kaiyuan as a “national high-tech enterprise,” which entails preferential tax rates, research subsidies and investment credits.
What to watch for: In its June 2024 advisory, FinCEN identified red flags to help financial institutions “detect, prevent, and report suspicious activity” connected to the procurement of fentanyl precursor chemicals and manufacturing equipment.
Vendor activity that advertises the sale of precursors are one red flag; past drug-related convictions are another. Others, FinCEN says, include:
- A chemical or pharmaceutical company in China or Hong Kong shares an address with other similar businesses or businesses that have no physical presence.
- A counterparty that has no supposed affiliation with China uses a China-based phone number or IP address that is affiliated with the website of a Chinese chemical or pharmaceutical company.
- Multiple, seemingly unrelated Mexican importing companies share phone numbers, email addresses, or physical addresses and transact with the same China-based chemical manufacturing and pharmaceutical companies.
One Chinese company, FinCEN said, was tied to more than 120 international fund transfers through Intercam. They totaled more than $4 million USD.
Read more from the Kharon Brief:
