Trump’s Iran Crackdown Isn’t Enough to Stop Hezbollah

By Emanuele Ottolenghi| June 11, 2019, 5:01 PM

Iranian demonstrators carry a portrait of Iran’s Supreme Leader Ali Khamenei and an effigy of U.S. President Donald Trump during a rally in the capital, Tehran, on May 10.

Hezbollah is reportedly feeling the pain of U.S. President Donald Trump administration’s maximum-pressure campaign against Iran. Tehran, after all, contributes about $700 million to the U.S.-designated terrorist group’s estimated yearly budget of approximately $1 billion. As sanctions squeeze Tehran, less money is supposedly flowing to Hezbollah as a result.

However, sanctions on Iran are unlikely to cause Hezbollah to go broke, because the Lebanese group brings in an estimated $300 million per year from independent sources including the proceeds of transnational crime, although the true figure is likely much higher. In Latin America’s booming cocaine trade, Hezbollah members and associates provide cartels with reliable money-laundering services.

Unless the Trump administration begins disrupting these cash flows, Hezbollah will live to fight another day.

Hezbollah has already shown it can survive tough sanctions on Iran. Between 2006 and 2014, the international community gradually built a formidable sanctions regime to pressure Tehran into nuclear concessions. Yet those sanctions had little impact on Hezbollah’s ability to consolidate its grip on Lebanon’s domestic politics while waging war next door in Syria. Iran, in fact, increased its contributions despite sanctions. Hezbollah’s budget also expanded throughout those years because, over the previous two decades, Hezbollah had diversified its income sources through illicit financial schemes in Latin America.

Washington has not made consistent efforts to address this threat. For fear of derailing nuclear negotiations with Iran, the administration of former U.S. President Barack Obama terminated Project Casssandra, an eight-year operation run by the Drug Enforcement Administration (DEA) that aimed to combat Hezbollah’s growing collusion with drug cartels. The Trump administration promised to turn its attention back to Hezbollah’s Latin American operations, but so far has issued neither sanctions nor indictments against Hezbollah allies in Latin America.

To be sure, Washington has not been idle in targeting Hezbollah outside Latin America. Since January 2017, the Treasury Department has sanctioned dozens of Hezbollah leaders, operatives, associates, and their businesses. The Department of Justice named Hezbollah one of the top five transnational criminal organizations that threaten America’s national security. It also established two Hezbollah task forces to review Obama’s decision not to seek prosecutions of Hezbollah drug traffickers and prosecute Hezbollah’s financial crimes. Congress, for its part, passed new Hezbollah sanctions last October, giving the president more expansive authority to prosecute Hezbollah financial facilitators.

In addition, ongoing probes of Hezbollah’s Latin American operations are yielding important results. The Trump administration has indicated that a key witness to Hezbollah’s financial crimes in the Western Hemisphere, former Venezuelan intelligence chief Hugo Carvajal, may soon be sharing “a treasure-trove” of information with U.S. authorities. The shadowy relationship between Venezuela, Iran, and Hezbollah expanded during Carvajal’s tenure. He was arrested in Spain in April and is awaiting extradition to the United States on drug charges as per an indictment originally filed in 2011. However, U.S. prosecutors need not wait for Carvajal’s revelations to begin hitting Hezbollah’s Latin American money-laundering schemes.

 

Robust evidence regarding Hezbollah’s illicit finance networks is already out in the open, sometimes thanks to unlikely sources. One is Ayman Joumaa, the kingpin of one of Hezbollah’s largest money-laundering schemes, which the DEA investigated as part of Project Cassandra.

The DEA believed that Joumaa, using the Lebanese Canadian Bank and a vast network of businesses, laundered $200 million a month for Colombian and Mexican drug cartels. The investigation culminated in Joumaa’s indictment in 2011 and in subsequent civil forfeiture actions against the Lebanese Canadian Bank and a string of used car businesses in the United States. Joumaa’s network allegedly used U.S. companies to buy used cars and resell them in West Africa as part of a complicated means of laundering drug money back to the cartels.

Joumaa has yet to face U.S. justice. Instead, in 2017, he sought to have his Treasury designation removed. As part of this effort, he voluntarily documented hundreds of transactions between Lebanese-owned, mostly Venezuelan businesses and Asian suppliers, with payments going through sanctioned money exchange houses in Lebanon. Joumaa most likely believed that the submitted documents would prove his innocence. In fact, this document dump includes names and personal details of company owners, bank account numbers, and other useful information to map his network and see to what extent it might still be operating. (Joumaa lost his bid and remains sanctioned.)

Evidence of Hezbollah’s crimes is also available in unfinished business from the very same Lebanese Canadian Bank case that implicated Joumaa. Hezbollah leveraged 300 U.S.-based used car dealerships in its money-laundering scheme exporting vehicles to West Africa. But actions against the bank’s network affected only 30 businesses.

Most of the remaining 270 are still operating. A Project Cassandra indictment from 2015 confirms that even after the demise of the Lebanese Canadian Bank, Hezbollah was still laundering vast sums of money through car businesses in Benin. The money trail is still hot, almost a decade later. But the Justice Department has not taken any further action.

And there is little doubt the Treasury Department thinks the money-laundering schemes are still ongoing. In April, the department sanctioned Chams Exchange Company, a money exchange house in Lebanon. According to the press release, Chams laundered money on behalf of drug trafficking organizations around the world—including transfers from Brazil, Colombia, and Venezuela—for the benefit of Latin American drug cartels, such as La Oficina de Envigado. According to the Treasury Department, Joumaa was one of Chams Exchange’s clients. The department targeted Hezbollah money’s entry point into Lebanon—an important step and one it repeatedly took in the past. Yet no serious action has been taken until now to disrupt Hezbollah’s money flows at their starting points in Latin America, nor have its numerous financial facilitators suffered any consequence for their ongoing actions. These may include Lebanese Brazilians operating in the Tri-Border Area (TBA) of Argentina, Brazil, and Paraguay.

 

The TBA is a hub of money laundering and drug trafficking activities. And the Trump administration has named it as an area of significant concern for Hezbollah terror finance. Hezbollah’s presence there is well documented and growing. Regardless, the United States has not sanctioned any Hezbollah operative or facilitator in the TBA in more than a decade, despite evidence, uncovered by the Paraguayan press in November 2018, of large-scale, TBA-based money laundering schemes allegedly benefiting Hezbollah. Indictments too have been slow in coming.

Washington has also failed to obtain any terror finance convictions, even though many of the money-laundering schemes in question continue to go through the United States. These schemes, however, pose not only terror finance concerns, which would be bad enough. They constitute a threat to the integrity of the U.S. financial system.

There is abundant evidence that U.S. authorities could use their leverage to go after Hezbollah more effectively. Washington has multiple ways it could go about this.

First, the Trump administration should unleash the Department of Justice against Hezbollah’s networks. To do that, the department needs to have more resources dedicated to the effort: more attorneys, more analysts, more interpreters, more field agents, preferably with language skills that include not just Spanish and Portuguese but Arabic as well. Calling something a task force cannot make up for shortages of staff and resources.

Second, the Trump administration should impose sanctions, prosecutions, and other interdictory actions against malign actors rather than leave them in the field, as intelligence officials often advocate, in the hope they can turn into informants. Confidential sources within the intelligence community in Latin America have complained to the Foundation for Defense of Democracies that the State Department has vetoed numerous arrest warrants against Hezbollah operatives. If this were true, it would seriously undermine U.S. national security objectives.

Third, the United States should start targeting Hezbollah’s enablers. If countries like Paraguay cannot or will not clean up their politics and banking system, the United States should press international forums like the Financial Action Task Force to blacklist them. (Paraguay’s status in task force’s regional body is currently under review.) The Treasury Department can also designate financial institutions used by Hezbollah as entities of primary money laundering concern under Section 311 of the U.S. Patriot Act. This is the same measure Obama used to target the Lebanese Canadian Bank in 2011. The combined pressure of the Section 311 designation and the U.S. criminal prosecution was ultimately responsible for forcing the bank to clean up its act.

Fourth, the Trump administration could target entire foreign jurisdictions in Latin America, such as the TBA, as zones of concern, much the same way that Washington previously punished Iran’s banking system for its role in financing terrorism and proliferation.

Fifth, the United States should deny or revoke the visas of Latin American officials that go out of their way to engage with Hezbollah or that stand in the way of U.S. justice. Some Latin American political and economic elites may consort with criminals, but they also love the United States as a place to study, vacation, and shop. This provides Washington with enormous leverage. Sometimes, public humiliation can be more effective than a judicial proceeding.

Finally, the United States should reinforce the impact of its terror designations against Hezbollah financiers in Latin America by also targeting local companies that help them. Sanctioned individuals are still trading and traveling with little problem. If the Treasury Department began regularly imposing fines and designations against local companies that facilitated such activities, they will be more likely to cut their ties to Hezbollah.

The Trump administration is successfully squeezing Iran’s economy. However, unless it extends its maximum-pressure campaign to Hezbollah’s multiple streams of revenue, Tehran’s terrorist proxy will retain its ability to strike at U.S. interests while continuing to fundraise for its own needs. 

Emanuele Ottolenghi is a senior fellow at the Foundation for Defense of Democracies. Twitter: @eottolenghi

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Tags: Argument, Hezbollah, Iran, Latin America, Lebanon, Middle East, U.S. Foreign Policy