On Friday, a Miami court sentenced Ali Nasreeddine Kassir, a Miami-based Lebanese businessman and suspected Hezbollah facilitator, who pleaded guilty to passport fraud and conspiring to commit money laundering totaling over $70 million. Kassir’s conviction is the opening salvo in a string of interconnected cases implicating alleged Hezbollah financiers Nader Mohamad Farhat and Mahmoud Ali Barakat, and their U.S.-based business counterparts. When combined, these cases involve money transfers worth hundreds of millions of dollars through the U.S. financial system, allegedly for laundering criminal proceeds, including from drug trafficking, and terror finance.
In response to this clear threat to the integrity of the U.S. financial system, the administration has begun to ramp up its pressure against Hezbollah’s overseas networks, yet South American governments need to offer much more cooperation for Washington’s efforts to succeed.
Both Farhat and Barakat are from Ciudad Del Este, the Paraguayan city in the Tri-Border Area of Argentina, Brazil and Paraguay, or TBA. A recent Miami Herald investigative piece called Ciudad Del Este “a giant washing machine for Latin American drug profits, knockoff consumer goods and terrorist fund-raising.” Hundreds of tons of commercial goods clear customs there on a monthly basis, mostly flying from Miami on commercial cargo flights.
Last year, the Justice Department correctly labelled Hezbollah a Transnational Criminal Organization. Also, since January 2017, the Departments of Treasury and State jointly made dozens of sanctions designations against Hezbollah’s overseas networks. Yet in order for these actions — from investigations to sanctions — to have their maximum impact, the U.S. is reliant on the cooperation of regional allies to block monies and assets before Hezbollah’s financiers can move them out of reach. Local governments have been slow to act against Hezbollah networks, sometimes even flat-out denying their existence.
Given the risks of local inaction and, occasionally, even obstruction, the Trump administration needs to calibrate its strategy to encompass a number of tools that can concurrently exercise maximum pressure on both Hezbollah networks and their corrupt enablers.
First, the U.S. must convince its regional allies to take tangible measures to meet the challenge.
None of the three TBA governments has designated Hezbollah as a terrorist organization. While Argentina has made important advances in this direction, Brazil and Paraguay, the two countries where Hezbollah financial networks are most active, lag behind. Such legislation is critical and President Trump should use his prestige to urge his counterparts to take this step.
The recent, successful visit of Brazil’s new president, Jair Bolsonaro, to Washington has created the basis for a fruitful personal relationship between the two leaders. Trump enjoys similar warm relations with Argentinian president Mauricio Macri, and he should leverage these personal relationships to compel Brasilia and Buenos Aires to take action.
Brazil, Paraguay and Argentina also need new legislation to enhance investigative and preventive measures by intelligence and law-enforcement agencies. Once in place, this legislative framework would enable these governments to impose sanctions and conduct investigations jointly with the United States. Joint designations would send a strong message to the global financial system, and the freezing of assets related to the designated parties would be more comprehensive and effective.
The TBA governments should also work to contain the damage caused by leaks, or worse, the active obstructionism mounted by corrupt officials. That is why the United States must be prepared to act independently when partner governments refuse to cooperate, or when their actions are undermined by corrupt local officials.
U.S. criminal investigations, indictments, and successful prosecutions must, where possible, continue, with added resources allocated to relevant government agencies in order to increase the number of cases prosecuted and increase the rate of successful convictions.
This is necessary because in the TBA large investigations into alleged money laundering schemes with possible terrorist financing connections frequently fail to go to trial. Last November, Paraguayan newspaper ABC Color tied Hezbollah to the 2016 “megalavado” (“mega-wash”) investigation, which uncovered one of the largest money-laundering schemes in Paraguay’s history. It remains to be seen whether the alleged scheme benefited the terror group. Regardless, the U.S. State Department flagged the case as a sign of Paraguay’s failure to fight money laundering.
It has been more than two years since Paraguayan authorities conducted raids against the suspected perpetrators. The prosecutors in charge of the case have been replaced several times — including, most recently, over the past Christmas holiday. There have been neither indictments nor exonerations.
Finally, the United States should leverage existing sanctions legislation, not just to disrupt Hezbollah’s overseas networks, but also target those who facilitate Hezbollah’s networks through complicity, collusion, corruption and protection. In October 2018, President Trump signed into law the Hezbollah International Financing Prevention Act Amendments Act. This legislation augmented previous efforts by the U.S. Congress to expand the reach of U.S. financial sanctions against Hezbollah through the original Hezbollah International Financing Prevention Act. Combined, this legislative framework presents a two-tiered threat to Hezbollah’s corrupt enablers in the TBA.
First, the legislation imposes secondary sanctions not only on known Hezbollah entities, but on those “determined by the President to be engaged in fundraising or recruitment activities for Hizballah.” While these activities are already prohibited by U.S. sanctions law, the secondary sanctions require the administration to sanctions “any foreign person that the President determines knowingly provides significant financial, material, or technological support to or for” Hezbollah fundraisers. This could include any Paraguayan, Brazilian, or Argentine individual or company that rents facilities to, provides banking services for, receives bribes from, or takes any other action that aides a person designated for fundraising or recruitment.
Second, the legislation authorizes the application of enhanced due diligence measures for US banks with respect to entire jurisdictions other than Lebanon — at the federal, state, or municipal levels — that “expressly consent to, or with knowledge allow, the use of their territory by Hizballah to carry out terrorist activities, including training, financing, and recruitment.” This means that if local politicians and bureaucrats in the TBA know about and disregard Hezbollah’s fundraising and recruitment in areas that they administer, the administration could subject the area itself to increased financial scrutiny.
The administration has an opportunity to utilize diplomacy, law enforcement actions, and sanctions designations to crack down on Hezbollah’s operations in the TBA, and Latin America more broadly. Doing so will not only limit Hezbollah’s operational capabilities, but defend the U.S. financial system against the drug profits and terrorist fund-raising that pervades that region.