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Copyright © 2019 The American Israel Public Affairs Committee

Funding the “Party of God”: Hezbollah’s Global Criminal Enterprise

Hezbollah has always relied on multiple streams of income to fund its operations. In addition to taxes, fees, and extortion levied against the hundreds of thousands of Lebanese Shia who live under its jurisdiction, Hezbollah counts on a huge hand-out from Iran—now totaling $1 billion annually. And for decades, the terrorist group has also developed and profited from a sophisticated network of criminal activities abroad, which now forms a financial network that operates worldwide. While an ongoing international effort is underway to halt this flow of illicit money to Hezbollah, America must redouble its involvement and prioritize this effort to better protect its strategic interests.

Criminal Activity in Latin America

Some of Hezbollah’s most lucrative illicit activities are based in Latin America, where the group earns $60 to $100 million annually. Hezbollah maintains close business relations with South American drug cartels such as the Columbia-based “La Oficina de Envigado”—formerly the violent enforcement arm of Pablo Escobar’s Medellin Cartel that has since become an independent organization—which smuggles large quantities of cocaine to the United States and Europe. 

In February, the U.S. Drug Enforcement Agency (DEA) uncovered a complex drug and money laundering scheme, known as the Black Market Peso Exchange, in which Hezbollah’s External Security Organization Business Affairs Component (BAC) was found to be working with various Latin American partners—including “La Oficina.” DEA Acting Deputy Administrator Jack Riley has described the BAC as a drug trafficking and laundering operational unit tasked with “provid[ing] a revenue and weapons stream for an international terrorist organization responsible for devastating terror attacks around the world.”

One of Hezbollah’s oldest and strongest redoubts in Latin America is the loosely regulated tri-border area (TBA), where Brazil, Argentina and Paraguay converge. The U.S. intelligence community regards the area a “free zone for criminal activity,” from which $10 million annually is sent back to Lebanon. In 2004, the United States sanctioned Assad Ahmad Barakat, a key terrorist financier in South America. "From counterfeiting to extortion, this Hizballah sympathizer committed financial crimes and utilized front companies to underwrite terror," said Juan Zarate, then a senior U.S. Treasury Department official. 

Since then, the United States has been targeting Barakat’s network, even as it tries to evade U.S. sanctions. In 2006, the Treasury Department sanctioned additional members of Barakat’s network, calling it “a major financial artery to Hizballah in Lebanon.” In 2010, the U.S. Immigration and Customs Enforcement targeted three Miami-based businessmen accused of exporting PlayStation video games and other electronics to the U.S.-sanctioned Galleria Page, a shopping center in Paraguay’s Ciudad del Este described by the Treasury Department as “the central headquarters for Hezbollah members in the TBA.” Hezbollah members operate a variety of retail businesses that directly support the Shiite militia out of this location. 

Furthermore, Hezbollah’s extensive organized crime and terrorist activities in Latin America pose a direct threat to U.S. homeland security, as the same operatives and organizations that move money for drug cartels also move money for terrorists. For instance, in October 2016, a DEA sting operation uncovered three Hezbollah-linked men suspected of laundering $500,000 of cocaine money for a Columbian cartel through banks in Miami.

It will be recalled that in 1992, Hezbollah terrorists bombed the Israeli Embassy in Buenos Aires, killing 29 people and injuring 242, while in 1994, Hezbollah attacked the Jewish community center in the Argentinian capital with even more devastating results: 85 people were killed and more than 300 injured.  

Criminal Activity in Europe and Africa

Hezbollah also engages in criminal activities in Africa and Europe. In 2011, Lebanese financial institutions, including the Lebanese Canadian Bank SAL (LCB), ran a successful money laundering operation through the U.S. financial system for Hezbollah. The Beirut-based bank wired funds to the United States for the purchase and shipment of used cars to West Africa. The profits—along with proceeds from narcotics trafficking—were then funneled through Lebanese exchange houses by Hezbollah-controlled money couriers, who diverted substantial portions of the cash to Hezbollah. The scheme was ultimately exposed by interagency counterterrorism efforts, resulting in the Treasury Department’s designation of LCB as a “financial institution of primary money laundering concern.” Other criminal activities in Africa include tapping into Lebanese expatriate communities to finance cover companies, blood diamond transactions, tax fraud and arms smuggling.

In Europe, the DEA and the U.S. Customs and Border Protection (CBP) work closely with international law enforcement agencies to combat Hezbollah’s nefarious activities, such as when the two agencies collaborated with their Belgian, Italian, French and German counterparts in “Operation Cassandra,” culminating in a February 2016 announcement regarding the arrests top leaders of a European BAC cell.  

Ways the United States Can Combat this Threat

One of the most effective U.S. government weapons against Hezbollah is designation by the Treasury Department of specific Hezbollah-affiliated individuals and businesses as terrorists or terrorist entities, which subjects them to sanctions. In October 2016, the Treasury Department imposed new sanctions on four individuals and one organization, all for their connection to the Iranian proxy group. Yosef Ayad, Muhammad al-Mukhtar Kallas, Hasan Jamal al-Din, Muhammad Ghaleb Hamdar and Global Cleaners S.A.R.L. were all designated for their links to ties to Hezbollah External Security Organization (ESO) member Adham Tabaja. The ESO is responsible for planning and executing Hezbollah terrorist attacks around the globe. 

In a similar case, the Treasury Department—building on a DEA investigation—designated in January 2016 an individual named Mohamad Noureddine as a “specially designated global terrorist” for transferring funds directly to Hezbollah. It also designated Noureddine’s Lebanese-based company, Trade Point Intl S.A.R.L. And two months earlier, the Treasury Department blacklisted China-based Adel Mohamad Cherri and his company, Le-Hua Electronic Field Co., for facilitating Hezbollah efforts to acquire dual-use technologies and electronics from China for transfer to the pro-Iran Houthi Shia rebels in Yemen.

Furthermore, Congress has led efforts to combat Hezbollah’s international criminal activities through the Hezbollah International Financial Protection Act (HIFPA) of 2015. The law—spearheaded by Sens. Marco Rubio (R-FL) and Jeanne Shaheen (D-NH), along with House Foreign Affairs Committee Chairman Ed Royce (R-CA) and Ranking Member Eliot Engel (D-NY)—requires the president to report regularly on the group’s “significant transnational criminal activities” and to brief Congress on a planned procedure to designate Hezbollah as a “significant transnational criminal organization” pursuant to Executive Order 13581. Moreover, the legislation requires all Lebanese and international banks to freeze or suspend any account held by individuals listed by the Treasury Department’s Office of Foreign Assets Control (OFAC) as affiliated with Hezbollah. Upon passage, Rep. Royce said that “years ago Hezbollah was a limited, regional threat. Today, it is a global threat conducting terrorist and criminal activities all over the world…To cut Hezbollah’s international reach, and deny it the funds needed for its terrorist activities, we must effectively target its financial networks.”

And already, the law is having an effect: It has significantly impacted Hezbollah's finances, contributing to the closure of at least 100 bank accounts connected to the terrorist organization.

The Work Continues.

Despite the aggressive efforts of the United States and its allies, Hezbollah’s criminal financial network remains strong. Hezbollah’s complexity—the group has many of the resources of a sovereign state—and secrecy make it challenging to uncover, track and disrupt its multiple criminal activities. Former DEA Operations Chief Michael Braun told the House Financial Services Committee on June 8 that Hezbollah “has metastasized into a hydra with international connections that the likes of the Islamic State and groups like al Qaeda could only hope to have.” The organization continues to use these international criminal connections to secure funds to support its war in Syria, plan terrorist attacks and prepare for another war with Israel. Accordingly, the current and incoming administrations, Congress and the intelligence community must continue to ensure that countering Hezbollah—on all fronts—remains a top priority.

Tags: Near East Report Near-East-Report