Negative-Cost Laundering: The Economics of the Broker in Chinese Transnational Crime

Abstract: This article formalizes the micro-economic profit model of the broker in Chinese Money Laundering Networks. Drawing on New Institutional Economics and European enforcement data, it identifies three revenue streams—proxy purchasing margins, VAT refund capture, and client commissions—and introduces a self-funding bridging mechanism whereby the broker borrows short-term from crypto pools to settle client obligations, repaying from future trade revenues. The article demonstrates that under empirically observable conditions, laundering generates net positive returns independent of the client fee. A corrected cost-of-capital comparison reveals that legitimate DeFi is cheaper per transaction than criminal platforms, implying that the broker's structural advantage lies in access barriers—not cost. These findings carry significant implications for enforcement.