December 17, 2021 | Policy Brief

Paraguayan Raids Further Expose U.S. Intermediaries’ Role in TBA Money Laundering Schemes

December 17, 2021 | Policy Brief

Paraguayan Raids Further Expose U.S. Intermediaries’ Role in TBA Money Laundering Schemes

Paraguayan authorities last week raided the offices of a dozen U.S.-linked companies and their accountants tied to suspected Paraguayan drug kingpin Reinaldo Javier Cabaña Santacruz, alias Cucho. Asunción’s latest law enforcement action, which unfolded in the Tri-Border Area (TBA) of Argentina, Brazil, and Paraguay, reflects the growing role of U.S. import-export businesses in conducting suspicious transactions with their TBA counterparts.

According to Paraguayan authorities, the raided companies were clients or suppliers of NEOS Import Export, a local import-export business that closed in 2018. NEOS routinely imported goods from the U.S. and China, and local investigators believe Cucho used transactions to launder drug money.

TBA trade-based money laundering (TBML) schemes heavily rely on U.S.-based companies, many of which are located in Florida. The raid and the evidence it may yield could offer important data to American investigators about the activities of major Latin American money launderers in the United States.

Shipping records for NEOS, accessed through the Panjiva commercial database, present clues to potential TBML methods employed, including fraudulent practices such as under invoicing and tinkering with products’ weights and value.

For example, records of an August 2018 shipment of 7,500 Motorola brand mobile phones purchased in the U.S. declared a value of $160 per unit — which should equate to a total cargo value at $1.2 million. Yet the bill of lading valued the cargo at $587,710, less than half what it should be.

Another August 2018 shipment, from China, of 1,175 subwoofers of an unspecified brand declared their value per item as $10, less than the retail cost of the product’s components. And a June 2018 shipment of Joico brand shampoo bottles priced them at half its declared value per item.

However, while Paraguayan authorities are examining shipping records seized during the raid for NEOS’ business activities prior to its closure, the company’s Paraguayan suppliers and buyers are still in business.

Some were implicated in other money laundering investigations. One case, U.S. v. Ali Kassir, prosecuted in Miami in 2018, names a company raided last week as the recipient of fraudulent shipments, including of counterfeit merchandise. Paraguayan authorities raided another company in 2016 as part of the Megalavado case, a multibillion-dollar suspected money-laundering scheme that Asunción has thus far been unable to prosecute, in part due to political interference.

A third company, a shop raided last week and allegedly a client of Cucho’s company, is owned by the spouses of two suspected money launderers — one currently awaiting trial in Miami in what local prosecutors have called one of the largest money laundering schemes in Latin American history.

Thus, the latest raid on Paraguayan companies could well overlap with other ongoing American investigations and help expose previously unknown illicit finance schemes. U.S. law enforcement agencies need to pay more attention to, and pursue more vigorously, the role played by U.S. intermediaries. Many TBML schemes, such as the one implicating Cucho’s company, pass through the United States and benefit from the complicity of U.S. companies. Sweeping investigations and tougher sentences against U.S. accomplices in these schemes would go a long way to disrupt drug traffickers’ ability to exploit the U.S. business environment for their own nefarious purposes.

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). For more analysis from Emanuele and CEFP, please subscribe HERE. Follow Emanuele on Twitter @eottolenghi. Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.


Sanctions and Illicit Finance