July 2, 2024 | The Cipher Brief

How Hezbollah Fundraises Through Crime

July 2, 2024 | The Cipher Brief

How Hezbollah Fundraises Through Crime

Hours after Hamas massacred 1,200 Israelis on October 7, Hezbollah opened a second front against Israel on its northern border, re-igniting a conflict now at risk of escalating into a full-blown war. While Iran provides most of its financing, crime is a core component of Hezbollah’s fundraising – in fact, the group’s avowed religious pieties notwithstanding, there is almost no crime from which its overseas networks will refrain in their pursuit of money: Drug traffickinggun runningblood diamondsillicit timber, even human trafficking

Disrupting Hezbollah’s overseas revenue streams would diminish its ability to sustain itself, and should remain a key U.S. policy objective. If the Biden administration is serious about preventing the Israel-Hezbollah conflict from widening, it should relaunch a previously successful strategy – since abandoned – that combined prosecutions, sanctions, and diplomacy to not only identify core Hezbollah financial networks through sanctions but also bring many of Hezbollah’s members to justice.  

Open source studies and public statements from U.S. officials dating to 2018 indicate that involvement in illicit activities generated 30% of Hezbollah’s annual operating budget of roughly $1 billion, with Iran providing the rest. But a closer look at Hezbollah’s narcotrafficking operations suggests its proceeds from criminal activity may far exceed those estimates. 

Consider Hezbollah’s involvement in drug trafficking and trade-based money laundering (TBML). Hezbollah handles cocaine shipments and their distribution. It also launders proceeds through complex commercial schemes. Official estimates assume that the value of the global cocaine trade hovers between $425 and $650 billion annually, with counterfeiting – the largest source of illicit revenue globally, and a key component of Hezbollah’s TBML schemes – worth twice that, up to $1.13 trillion a year. While hardly the only global player, Hezbollah’s engagement in both activities is significant.  

The Ayman Joumaa network – which the U.S. Drug Enforcement Administration (DEA) exposed in 2011 and Treasury linked to Hezbollah in 2012 – was laundering up to $200 million a month for Mexican and Colombian cartels. Joumaa, according to the DEA, took a hefty 8-14% commission for his services. Assuming the 2018 estimates are correct, the Joumaa operation alone would have generated at least two-thirds of Hezbollah’s annual revenue from illicit activities. And while Joumaa’s operation was eventually disrupted, his complex scheme to launder drug proceeds continued to operate long after sanctions and indictments were made public. 

Joumaa’s money laundering organization was not the only game in town. The DEA estimated Hezbollah’s proceeds from drug trafficking alone to have been higher than the overall U.S. estimate of its global fundraising efforts. A 2016 DEA affidavit filed with a Florida court in a Hezbollah money laundering case put the value of Hezbollah’s annual proceeds from narcotics at $400 million – and even that might now be a conservative estimate.  

Beyond narcotics

Moreover, the illicit global narcotics trade isn’t Hezbollah’s only source of revenue. Hezbollah plays a large part in the illicit economy of the Tri-Border region of Argentina, Brazil, and Paraguay, which is said to generate at least $5 billion a year in illicit transactions. The group likewise helps Venezuela’s regime launder money through multiple way points, and it runs several fraudulent schemes in West Africa. Hezbollah’s presence in West Africa is even more widespread and influential than in Latin America. U.S. authorities, for example, seized $50 million in 2019 from convicted Hezbollah financier Kassim Tajideen as part of a civil forfeiture action against his money laundering activities on behalf of Hezbollah. Tajideen’s family companies and networks are still active in Africa, as are others.  

The success of Hezbollah’s overseas networks depends on more than being good at business and in cahoots with crime syndicates. Corruption also plays a large role in helping Hezbollah and its associates perpetuate their malfeasance. Trafficking and laundering depend on the ability of terror groups to establish working relations with crime syndicates, which can evolve into veritable and increasingly symbiotic partnerships. Both criminals and terror financiers depend on one another for the supply of illicit merchandise, their transport, distribution, and laundering of the proceeds from sales. Critically, both rely on their ability to infiltrate state institutions at all levels – police, customs, border guards, port workers, the judiciary, and elected officials – and put them on their payrolls to protect their own commercial enterprises. 

As the former Assistant Secretary for Treasury’s Terror Finance Intelligence unit, Marshall Billingslea, said, in a speech at the Atlantic Council in September 2019, “Hezbollah supplements its income by using businessmen to operate a wide range of companies, using political relationships to gain favored contracts and even monopolies in prominent sectors … Hezbollah also benefits from various international criminal schemes, including money laundering, drug trafficking and counterfeiting, operated by its supporters, sympathizers, and members.”  

Thanks to the global nature of the Shi’a Lebanese diaspora, Hezbollah has loyalists just about everywhere. Since its establishment in the early 1980s, Hezbollah has successfully infiltrated diaspora communal institutions, from Abidjan, Ivory Coast, to Foz do Iguaçu, on Brazil’s side of the Tri-Border Area, using them to nurture loyalty and indoctrinate new generations. Lebanese Shi’a businessmen are happy to welcome the party’s emissaries, and even to provide them with assistance. It is a mutually beneficial relationship which gives diaspora communities the ability to support the party’s struggle for power in Lebanon and against its enemies in the region, but also gives them access to Hezbollah’s patronage system, which connects them to their roots. 

As a result, Hezbollah can launder money globally, through intricate networks built not just on religious and party allegiance, but also on blood ties and clan loyalties. Through their businesses, friendly Lebanese merchants support TBML schemes that move merchandise such as used cars, electronics, brand clothing, and cosmetics to cover the transfer of illicit proceeds. Hezbollah relies on money exchange houses, both in Lebanon and overseas, to move currency. It also has access to Lebanon’s banking system through a Hezbollah-controlled phantom bank, the U.S.-sanctioned Al Qard Al Hassan.  

Further, Hezbollah’s militia commanders and clerics have relatives managing businesses across the world. For example, Sheikh Khalil Rizk, a Hezbollah cleric who plays a key role inside the group’s foreign relations department, has a brother who runs a cell phone business in São Paulo, Brazil. Mohamad Mansour, a Hezbollah operative arrested in Egypt over a decade ago, also has a brother running a business in São Paulo, just two blocks away from Sheikh Rizk’s sibling. The de facto leader of Hezbollah’s financial operations in the Tri-Border Area, Assad Ahmad Barakat, is the brother of Sheikh Akram Barakatanother figure in Hezbollah’s clerical hierarchy. The Barakat family’s business interests extend across Chile, Argentina, Paraguay, Brazil, and Angola. Joumaa ran his business from Colombia with his brother and his cousin, who is still there. And throughout the years, communities across Latin America have periodically mourned Hezbollah’s fallen fighters, revealing the deep familial ties that connect the diaspora to the party and its militant struggles. 

In short, Hezbollah relies on a worldwide network of familial ties, much like its Christian Mediterranean counterpart, the Italian Mafia. 

Fighting these networks and disrupting their revenue streams would have a dramatic impact on Hezbollah’s ability to arm itself and continue to be the dominant player in Lebanon’s politics. If the Biden administration truly wishes to defuse the current escalation along the Israel-Lebanon border, relaunching a strategy aimed at drying up Hezbollah funding sources would be an excellent starting point. 

Dr. Emanuele Ottolenghi is a senior fellow at FDD and an expert at FDD’s Center on Economic and Financial Power (CEFP) focused on Hezbollah’s Latin America illicit threat networks and Iran’s history of sanctions evasion. He is author of The Pasdaran: Inside Iran’s Islamic Revolutionary Guard CorpsIran: The Looming Crisis, and Under a Mushroom Cloud: Europe, Iran and the Bomb.

Issues:

Hezbollah Iran Iran in Latin America Iran-backed Terrorism Israel Lebanon Sanctions and Illicit Finance