1. Introduction

In October 2025, a major operation carried out by the Guardia di Finanza and coordinated by the European Public Prosecutor’s Office (EPPO) brought renewed attention to the phenomenon of Chinese clandestine banks, active in the covert movement of capital both within and beyond national borders. The mechanism underlying so-called underground banks (or shadow banks) has its roots in the ancient practice of fei ch’ien, literally “flying money,” a system originally devised to facilitate trade and now adapted to the needs of financial crime. Numerous investigations conducted over the years have revealed the existence of a structure capable of transferring hundreds of millions of euros from Italy to China, passing through South America, the United States, and Eastern Europe. An apparently simple model, made possible by a complex and articulated network that allows the value of money to move without the physical transfer of cash.

2. From imperial receipts to contemporary informal networks

To understand the phenomenon of shadow banks of Chinese origin, it is necessary to go back to the Tang dynasty (618–907 AD), when the need to ensure tax collection and facilitate trade required reducing the risks associated with the physical transport of money. Long distances, endemic insecurity in certain provinces, and the sheer weight of coinage made the movement of capital difficult.

The fei ch’ien protocol responded to these needs through an administrative innovation, allowing a merchant who had concluded business anywhere in the empire to pay taxes at the nearest tax office, which would issue an official receipt. The merchant, carrying this document (a sort of bearer cheque ante litteram), could then return to his home region and deposit the receipt at the local tax office, proving that he had fulfilled his fiscal obligations. The concept was simple and was later adopted by modern banking systems, in which the value of money travels between branches while cash remains stationary, thanks to the credibility of the institution and the recording of debts and credits between offices. It was therefore a mechanism based on institutional trust, surprisingly close to the principles governing modern electronic transfers.

With the advent of the modern era and the expansion of Chinese communities abroad, the flying money system evolved, transforming into an informal remittance network operating on the basis of personal relationships, guanxi (literally “connections between people”). Guanxi, understood as a network founded on the reciprocal exchange of favors, is the prerequisite that makes these circuits function. Its strength lies in the confidentiality and reliability of participants, bound by very strict behavioral norms: anyone who breaks these rules immediately loses access to the network and is also excluded from the social context that sustains it.

Arriving at the present day, we find a mechanism far from being in decline; on the contrary, investigations conducted in various countries—including China itself—show that the system is continuously expanding. Today, the technique has integrated the possibilities offered by new technologies, through which receipts have been replaced by encrypted messages and codes, tax registers by digital platforms, and tax offices by basements or back rooms. Nevertheless, the underlying logic remains unchanged: money “flies” without moving.

2.1. The model applied to contemporary money laundering

In today’s landscape, fei ch’ien forms the operational basis of so-called Underground Chinese Banks, networks that operate outside official financial systems and allow immediate, discreet, and difficult-to-trace transfers.

The typical scheme, now established in various parts of the world, involves an individual seeking to use the bank’s services visiting a clandestine branch and handing over a sum of cash to the local broker, who records the transaction and provides a code that serves as a receipt. The bank’s client then shares this receipt-code with the person designated to collect the money in another country, who goes to the local clandestine branch and, after presenting the code, can withdraw the value in local currency minus the service commission.

This mechanism is particularly attractive to those seeking to evade tax controls, conceal capital, or launder funds derived from illicit activities. In the United States, it has emerged that this technique is used to pay for drug shipments originating from South America.

The mechanism is linear: cartels send drugs to traffickers in the United States who, after reselling the merchandise, deliver the dollars to Chinese brokers. By sharing the code between U.S. criminals and Mexican counterparts, cartels can withdraw the equivalent amount in local pesos. According to investigators, commissions are low, ranging between two and three percent—about half the cost of traditional laundering circuits, which are slower and riskier.

At this point, the branch that has collected dollars in the United States finds itself holding enormous liquidity, which at first glance might seem problematic. In reality, this availability represents a valuable resource and becomes the object of a second cycle of transactions centered on U.S. currency. The purchase of dollars remains a useful operation for safeguarding savings and investments from fluctuations in weaker currencies. Consequently, shadow banks sell dollars to wealthy Chinese citizens interested in investing in the United States, circumventing the $50,000 limit imposed by Beijing on overseas transfers; alternatively, the banknotes are resold to individuals needing to transfer illicit funds derived from criminal activities and corruption. The result is a self-feeding circuit in which cash, virtual credits, and official bank accounts intertwine in a continuous flow that is difficult to intercept.

2.2. The evolution of the phenomenon in Italy

Underground banks have a multi-decade history in Italy as well. The first investigations date back to the 2008–2010 period and documented the use of clandestine banks and money transfer services to move undeclared funds by Chinese entrepreneurs.

Over time, the network has expanded and diversified. Today, the clientele is much broader and includes, among others, domestic criminals involved in drug trafficking, entrepreneurs seeking to evade taxes, Russian oligarchs attempting to bypass sanctions, and actors in the construction sector involved in fraud related to Italy’s building renovation tax incentives (superbonus edilizio).

Among the many investigations carried out by law enforcement, Operation “Via della Seta” (2021) plays a decisive role, having succeeded in reconstructing an international system of false invoicing, foreign shell companies, and payments to China. According to investigators, funds from Italian entrepreneurs seeking to evade taxes were transferred to Eastern European accounts through false invoices and then moved, using the same method, to Chinese bank accounts. Once the payment was registered in China, clearance was sent to the shadow branch in Italy, where the Italian entrepreneur could withdraw the fictitiously paid amount, minus the clandestine bank’s commission, thereby evading tax, environmental obligations, and VAT payments. Once again, it was demonstrated that these circuits are capable of simultaneously laundering money and reinvesting surplus cash, generating further profits.

2.3. Impacts on international markets

The expansion of Chinese clandestine banks is a phenomenon whose effects extend beyond the sphere of financial crime. It constitutes a factor of instability for the global economy, as it creates parallel financial channels that escape state and supranational regulation.

These flows do not pass through authorized intermediaries and make the application of anti-money-laundering regulations and the tracking of suspicious transactions more difficult. Moreover, the lack of transparency affects competition. Companies that use these circuits can evade taxes, manipulate prices, simulate commercial operations, or circumvent fiscal and customs rules, gaining undue advantages over those operating legally.

At the same time, clandestine networks offer specialized services to criminal groups and international cartels, which can outsource money-laundering operations to expert intermediaries, reducing the risk that investigators can reconstruct the entire criminal operation.

Finally, the phenomenon has repercussions on international trade, as the same networks are used to alter the value of goods, disguise payments, or construct fictitious transactions. This undermines trust in markets and limits states’ ability to protect their fiscal systems, leading to a progressive erosion of economic sovereignty.

3. Operational proposals to curb the phenomenon

In the United States, the phenomenon has been observed for some time and is considered a strategic as well as an economic risk. In a parliamentary hearing, Channing Mavrellis of Global Financial Integrity sought to outline a more structured approach to countering it, highlighting several areas of intervention.

• A first element concerns the need to study more precisely the composition of the networks involved, which include brokers, shell companies, financial intermediaries, and commercial operators. Understanding their internal functioning is essential to identifying points of intervention. Mavrellis also emphasized the importance of targeted sanctions not only against individuals or entities directly involved, but also against countries that fail to cooperate with investigations or adequately share financial data.
• Another front concerns the link between these networks and drug trafficking, keeping the fight against corruption central, as it is considered a driving force behind international money-laundering networks. Achieving this requires more effective international cooperation and stronger, more structured investigative tools, strengthening mutual legal assistance agreements and promoting personnel exchanges between different intelligence units.
• Finally, Mavrellis underscored the need to increase resources for bodies responsible for combating financial crimes, which often operate with limited tools compared to the speed of illicit financial flows. The issues highlighted by Mavrellis, reinterpreted in an Italian and European context, can form the basis for a legal and cultural reflection capable of strengthening Italy’s ability to counter the phenomenon more effectively.

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4. Conclusions

Underground Chinese banks represent an emblematic case of the transformation of an ancient administrative mechanism into a central instrument of global money laundering. The original principle of fei ch’ien has remained intact, while the contexts and actors using it have changed.To effectively counter the phenomenon, a purely repressive, ex post approach—incapable of promptly grasping the evolution of the mechanism—is insufficient. It is necessary to understand its cultural and operational logic, the role of trust-based relationships, and the reasons that ensure its resilience. Starting from this reflection, it will be possible to develop policies, plan operations, and train personnel capable of reducing the impact of a phenomenon that, despite its ancient roots, continues to significantly influence the contemporary global economy.

Bibliography

Zhao, L. S. (2012). Chinese Underground Banks and Their Connections With Crime: A Review and an Appraisal. International Criminal Justice Review, 22(1), 5–23. (https://doi.org/10.1177/1057567712438917)

China in Our Backyard: How Chinese Money Laundering Organizations Enrich the Cartels: Hearing Before the Subcommittee on Health Care and Financial Services of the Committee on Oversight and Accountability, House of Representatives, One Hundred Eighteenth. (2023). U.S. Government Publishing Office. (https://oversight.house.gov/wp-content/uploads/2023/04/Hearing-on-Chinese-Money-Laundering-Mavrellis-Written-Testimony-4.26.2023-FINAL.pdf)

Barberini (2023) Informal Funds Transfer Systems. I sistemi di trasferimento informale di denaro. I sistemi IFTS minori 

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Sebastiano Teani, who first earned a degree in Philosophy and then in Law and Technology, has long studied international crime and money laundering, with particular attention to the application of new technologies. His book Bitcoin, mafie e cyberriciclaggio was awarded by the Antimafia Association Cortocircuito of Reggio Emilia and the Emilia-Romagna Region. Alongside his interest in these topics, he focuses on geopolitics and the analysis of contemporary conflict scenarios, often complemented by field experience in areas of international tension, including Ukraine and Transnistria. He has worked as a reporter in Armenia after the end of the Nagorno-Karabakh war, reporting for Altreconomia and East Journal.