Paraguayan authorities extradited Nader Mohamad Farhat yesterday to Miami, where he faces criminal charges of money laundering. Farhat’s case promises to reveal the intricacies and magnitude of trade-based money laundering in the Tri-Border Area (TBA) of Argentina, Brazil, and Paraguay, including the role played by Lebanese Hezbollah.
A Miami federal court will decide whether Farhat will be tried there or in New York, where he faces similar charges. In the case before the New York court, Farhat is an alleged co-conspirator in a case involving another Paraguayan national of Lebanese origin, Mahmoud Ali Barakat, and three other defendants who are accused of assisting in the laundering of drug monies from inside the U.S.
Court documents refer to Farhat as a “known money launderer for narcotics organizations and other illicit organizations,” while media reports allege a possible connection to Hezbollah. According to a Department of Justice press release announcing the indictment of his co-conspirators, Farhat participated in “an international money laundering scheme relying on the complexities of global trade, and the use of … businesses here in New York and in Florida, to launder millions of dollars for transnational drug traffickers and other bad actors.” (The cases have since been merged.)
These cases highlight how Latin American drug cartels and other organized crime groups continue to exploit complex, trade-based schemes to launder their ill-gotten gains. Critically, many of the companies involved are in the United States, exposing the U.S. financial system to considerable reputational risk.
The case also reveals the growing importance of the TBA to this type of financial crime. Almost a decade ago, a large Drug Enforcement Administration investigation exposed the connection between Latin American drug cartels and Hezbollah financiers. The investigation focused on the Lebanese Canadian Bank and revealed Hezbollah’s use of extensive trade-based money laundering networks in Colombia and Venezuela, which laundered cartel drug money through West Africa and used car businesses in the United States before repatriating the funds to the cartels through Lebanese-based financial institutions.
Colombian cartels have now shifted some of their operations to Paraguay, making the landlocked country an important transit point for cocaine. Three years ago, another Lebanese national, Ali Issa Chamas, was arrested in the TBA and extradited to Miami, where he was sentenced in December 2017. Evidence obtained by the author from Paraguayan intelligence officials shows that Chamas had business ties to Colombia and to Brazilian drug syndicates. In July 2018, Paraguayan authorities raided a lab where Colombian nationals were found to be working on processing cocaine into fake charcoal as a way to ship the drug to the Middle East. The ringleader had previously worked for Colombian cartels.
There are good reasons for this shift. The TBA is well-known hub for contraband and the sale of counterfeit goods. With an estimated value of $18 billion a year, the TBA illicit economy has gained prominence for organized crime groups in search of opportunities to move merchandise and launder revenue.
It will likely be months before Farhat and his co-conspirators go to trial. Court documents suggest that the electronic evidence alone, seized in part during raids on Farhat’s home and the money exchange house he ran, includes several terabytes of material. U.S. law enforcement should be aggressive in its investigation of Hezbollah-related criminal activity in the TBA, which is becoming an increasingly important source of revenue for the Lebanese terrorist organization.
Emanuele Ottolenghi is a senior fellow at the Foundation for Defense of Democracies (FDD), where he also contributes to FDD’s Center on Economic and Financial Power (CEFP). Follow Emanuele on Twitter @eottolenghi. Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington, DC-based nonpartisan research institute focusing on foreign policy and national security.