By Emanuele Ottolenghi
September 2, 2019
When Paraguay announced it was designating Hezbollah as an international terrorist organisation last week, it created a new legal basis to take action against the Lebanese group’s money laundering and terror-financing activities. These fundraising operations criss-cross the globe, from Latin America and the US to West Africa. Hezbollah exploits existing smuggling routes and links to cartels and relies on large family networks to boost its coffers, without having to develop a criminal infrastructure. Latin America is just starting to wake up to the threat.
With Hezbollah’s proscription, Asuncion can help reduce the group’s pervasive and destabilising influence, across Latin America. The fight against Hezbollah needs to be global and Latin America, where much of the group’s illicit activities are concentrated, is a good place to start.
Until recently, Latin American governments were unwilling to label Hezbollah a terrorist organisation. Last month, however, Argentina took the unprecedented step of doing so, noting Hezbollah’s responsibility for terror attacks against an Israeli embassy and a Jewish community centre on Argentinian soil in 1992 and 1994 respectively. The designations followed Argentina’s creation of a public registry for terror entities and individuals.
Argentina’s actions clearly influenced Paraguay, its neighbour to the north, whose government previously refused to acknowledge the obvious. In January, Paraguay’s then foreign minister Luis Castiglioni publicly denied that Hezbollah had engaged in illicit finance activities in the country. Paraguay’s director of the National Intelligence Secretariat Esteban Aquino Bernal echoed his claim, suggesting that the main challenge for financial authorities was not money laundering but tax evasion. Interior minister Juan Ernesto Villamayor also downplayed the issue. Even the Supreme Court’s then president Victor Manuel Nunez Rodriguez weighed in, saying he had no evidence Hezbollah was financing terrorism.
The Trump administration urged Paraguay to reconsider. Multiple visits by senior officials – including by Secretary of State Mike Pompeo to Paraguay in April and Argentina in July – ultimately persuaded Paraguay’s government that it needed to get tougher on Hezbollah.
Even before the Hezbollah designation, Paraguay extradited a handful of suspected Hezbollah operatives to the US. However, the creation of a new legal instrument was necessary, given that Paraguay has for years been a key hub of Hezbollah’s illicit finance operations. Over the course of four decades, the terrorist organisation has built extensive infrastructure in the Tri-Border Area (TBA) of Argentina, Brazil and Paraguay.
The TBA is a metropolitan centre, home to nearly one million residents and a well-developed tourism infrastructure, including three international airports and a high-quality service industry. It is also an ideal place for Hezbollah to establish roots and raise funds, given the pervasive corruption in Paraguay’s government, not to mention its weak and overburdened judicial system. The TBA is shared by three countries, with two languages, three currencies, weak border controls and well-established smuggling routes that have contributed to a thriving illicit economy, which Brazilian authorities have assessed to be worth $18 billion a year. Hezbollah has taken its share of that economy through a network of local residents; the area has one of the largest Shia Lebanese communities in Latin America.
Hezbollah’s modus operandi in the TBA is a miniature version of what it does in Lebanon to control and co-opt the Shia population. As in Lebanon, Hezbollah has funded the establishment of Shia communal institutions across Latin America. Where those institutions already existed, it has offered its support to sustain them. The result is that clerics of local mosques and cultural centres, instructors of local youth movements such as the scouts, and teachers at local schools are imparting Hezbollah dogma to local communities.
The results are very visible. Communities in Latin America regularly mark May 25, the day Israel withdrew from south Lebanon, with carefully choreographed communal events. They frequently welcome Hezbollah and Iranian clerics as speakers. They support Hezbollah’s media machine with local correspondents and get support, in turn, from Hezbollah’s publications to advance their agenda. For example, via the Lebanese embassy in Paraguay, Hezbollah mounted a pressure campaign to prevent the extradition to the US of a suspected Hezbollah financier, Nader Mohamad Farhat. Moreover, Shia communities in the TBA join in mourning Hezbollah’s fallen, especially when they have a family connection to the deceased.
Last week, for example, Lebanese residents of the TBA took to social media to mourn the death of two Hezbollah operatives, Yasser Ahmad Daher and Hassan Zbeeb, killed in southern Syria in the recent Israeli airstrikes. Israel claimed the two had travelled to Iran to train with drones before being dispatched to southern Syria and had been planning to mount an attack across the border.
Hezbollah can also leverage its followers in the TBA for fundraising purposes. In recent years, given Hezbollah’s growing need to generate revenue over and above the annual group’s subsidy from Iran, its financial backers and facilitators overseas escalated their involvement in illicit activities. In Latin America, this included drug trafficking and money laundering on behalf of local criminal syndicates.
For cartels, Hezbollah offers an opportunity to expand their markets without having to build a criminal infrastructure in far-flung places. After all, Hezbollah can leverage supporters in expatriate communities across the globe. Access to this global network offers the cartels efficient channels to distribute merchandise to distant markets as well as repatriate revenue through complex trade-based money-laundering schemes.
In the Lebanese-Canadian Bank case of 2011, US authorities accused Hezbollah facilitators of laundering drug money for Mexican and Colombian cartels to the tune of $200 million a month by channelling it through West African used-car businesses that imported their inventory from US-based dealers. The money, once laundered through the bank, would then be repatriated to Colombia, minus a hefty commission.
The complex web of connections necessary to run these schemes is rooted in the large family networks that run through Hezbollah-linked expatriate communities. For example, the Barakat family, the most identified with Hezbollah in the TBA, has multiple members and businesses, not only across Latin America but in West Africa as well, an important area for Hezbollah’s money laundering and drug-trafficking operations.
The US is not immune to such influence. Many of Hezbollah’s schemes run through Miami and other American commercial hubs, as evidenced by a string of recent cases involving TBA businesses trading with front companies in both Miami and New York. Such schemes often triangulate with Hong Kong and mainland China, where Hezbollah operatives have an established commercial presence, thus ensuring they control virtually every step of the trade.
The size and complexity of these operations has until now ensured that Hezbollah’s terror-financing operations continue to thrive, despite the occasional setback caused by criminal investigations into drug trafficking and money-laundering schemes.
If Hezbollah’s sources of funding outside Tehran are to dry up, the Trump administration and its allies, especially in Europe and the Gulf, need to aggressively expand investigations to halt Hezbollah’s fundraising.
So far, the signs are not encouraging. The Trump administration has certainly used its political influence to get other countries to impose sanctions against Hezbollah, including in Latin America. Yet much more needs to be done. Hezbollah’s fundraising apparatus continues to thrive, thanks to the strong loyalty and family bonds that tie local communities to the terror group. Prosecuting illicit finance schemes and disrupting their chain of supply is a vital component of any successful strategy. Ultimately, though, unless the social, educational, religious and cultural infrastructure of these communities is permanently severed from Hezbollah’s control, the group’s nefarious influence and ability to indoctrinate, radicalise and recruit among those communities will ensure continuity of commitment to its fundraising efforts.
Foundation for Defence of Democracies