Middle East Intelligence Bulletin
Jointly published by the United States Committee for a Free Lebanon and the Middle East Forum
  Vol. 4   No. 1 Table of Contents
MEIB Main Page

January 2002 


Hezbollah's Global Finance Network: The Triple Frontier
by Blanca Madani
Blanca Madani is a freelance writer and co-president of the World Amazigh Action Coalition (WAAC).

In the aftermath of the September 11 attacks in the United States, the American government has declared a zero tolerance policy regarding international financing of organizations listed as terrorist groups by the State Department. Recently, the Lebanese Shi'ite Islamist movement Hezbollah has come under close scrutiny. While the group has neither been linked to Osama bin Laden, nor implicated in any direct attacks against American interests since the 1980s, its periodic raids against Israeli forces across the UN-demarcated "Blue Line" in south Lebanon and alleged coordination with Palestinian extremist factions are regarded in Washington as a paramount threat to the Middle East peace process.

Although much attention has focused on the flow of Iranian aid to Hezbollah, estimated at $60-100 million per year, the group has also relied extensively on funding from the Shi'ite Lebanese Diaspora in West Africa, the United States and, most importantly, the so-called Triple Frontier, or tri-border area, along the junction of Paraguay, Argentina, and Brazil. While the volume of illegal remittances from South America is not known exactly, ongoing investigations by police in Paraguay indicate that tens of millions of dollars have been transferred in recent years.

The Setting

The Triple Frontier is centered at the intersection of the borders of Paraguay, Argentina, and Brazil, encompassing the cities of Ciudad del Este (Paraguay), Puerto Iguazu (Argentina), and Foz de Iguazu (Brazil). Due to the absence of strict border controls, the zone has long been a haven for drug and arms trafficking, smuggling, counterfeiting and other illicit activities.

Due to inadequate government supervision of the zone's numerous airstrips and waterways, the zone has been a nexus for illegal immigration. An investigation by the National Direction of Civil Aeronautics (DINAC) determined that 16 foreigners enter Paraguay illegally on a weekly basis via the airport of Ciudad del Este, paying some $5,000 (925,000 pesetas) in advance,1 but many more are believed to enter by land. Until September 14, border controls were almost non-existent on Puente de la Amistad (Bridge of Friendship), over the Parana river, which unites Foz de Iguazu with Ciudad del Este. The narrow bridge is 500 meters long and cars often line up for miles to cross it, while hundreds of Brazilians cross on foot each day to work in the import businesses of Ciudad del Este. Border controls are also lacking on the Brazilian side in Foz de Iguazu, both at the frontier with Paraguay and with Argentina via the Tancredo Neves Bridge.2 The Argentine government has maintained relatively stricter controls on its side since the 1992 and 1994 bombings in Buenos Aires (see below) . In recent years, the antiterrorist departments of the three countries' police forces (the so-called "Tripartite Command") have worked jointly to exert stricter controls on the activities of foreign nationals in the area.

The Arab population of the zone is believed to number over 20,000 (about one in every 30 residents), most of whom are Muslim Lebanese.3 Most reside in Ciudad del Este, which was formerly a small village called Puerto Stroessner until the construction of a massive hydroelectric dam in 1967 initiated its transformation into what has become Paraguay's second largest city, with a population of around 220,000, and an enterprise zone of imported products, both legal and illegal. It is estimated that there are around 7,500 retailers in the area of Arab origin.4 Construction of the dam, which is shared with Brazil, also increased the population of Foz de Iguazu, reaching presently some 350,000 inhabitants, while Puerto Iguazu on the Argentine side has a population of a little under 35,000.

Hezbollah's involvement in the zone first came to light when Argentine authorities concluded that the bombings of the Israeli Embassy in 1992 and the Argentine-Israeli Community Center in Buenos Aires in 1994 were carried out by Hezbollah cells headquartered in Ciudad del Este. The investigation into the attacks revealed that the region had become a haven for criminal activities linked to Hezbollah and other Islamist groups. The US Department of State report, Patterns of Global Terrorism - 2000, characterized the Triple Frontier as "a focal point for Islamic extremism."5

The Investigation of Hezbollah Fundraising

The first major breakthrough in the investigation of illicit Hezbollah activities in the triple border area came in February 2000, when Paraguayan authorities arrested a 32-year-old Lebanese businessman, Ali Khalil Mehri, who had been allegedly selling millions of dollars worth of pirated software and funneling the proceeds to Hezbollah. According to the police, a CD confiscated from his store in the Triple Frontier contained images of "terrorist propaganda of the extremist group Al-Muqawama," an extremist wing of Hezbollah. Moreover, documents seized during the raid included fundraising forms for an organization in the Middle East named Al-Shahid, ostensibly dedicated to "the protection of families of martyrs and prisoners," as well as documents of money transfers to Canada, Chile, the United States and Lebanon of more than $700,000.6

Just weeks after his arrest, however, Mehri was released on bail. Although the court later rescinded the decision and formally indicted him on charges of violating copyright laws and aiding a criminal enterprise,7 by that time Mehri had crossed into Brazil. He later took a flight from Sao Paulo to Paris and is believed to have continued on to Syria.

Meanwhile, investigators were closely monitoring the activities of a much bigger fish - Assad Ahmad Barakat, the alleged ringleader of Hezbollah's financial network in the Triple Frontier. Barakat arrived in Paraguay as a teenager in 1985, having earlier fled the civil war in Lebanon with his father, a chauffeur for a Lebanese politician. According to investigators, Barakat set up a large network of businesses in Ciudad del Este that were involved in illicit fundraising for Hezbollah. In 2000, however, he fled to Brazil, where he is openly living with his Brazilian wife and children.

The Paraguayan investigation of illicit Hezbollah fundraising appeared to have stalled prior to the September 11 attacks in the United States, apparently because the government feared there would be economic repercussions. The Triple Frontier is the largest center of commerce in the country and the Arab community there is frequently described by the press as the "pillar" of economic activity. Should this community abandon the region en masse, the impact could be devastating for the country's economy.

After September 11, Paraguay , which is dependent on US aid, came under intense American pressure to eliminate Hezbollah's finance network. Within 10 days of the attack, 16 Lebanese nationals who had entered Ciudad del Este illegally were arrested. In early October, police raided a wholesale electronics store owned by Barakat (who had just been added to the Bush administration's terrorist list) and arrested two of his employees, Mazen Ali Saleh and Saleh Mahmoud Fayed. The raid uncovered documents showing that they had sent periodic remittances of $25,000-50,000 to Hezbollah,8 as well as videos and literature that a Paraguayan official said "encouraged young men to join Hezbollah's war against Israel and become suicide bombers."9 The police also obtained a letter from Hezbollah Secretary-General Hassan Nasrallah saying that he "is one of the most thankful for the contributions Assad Ahmad Barakat has sent from the Triple Border."10

Additional raids over the next few months uncovered evidence specifically implicating Barakat. On November 8, Paraguayan anti-terrorist police arrested another Lebanese national linked to Barakat, Sobhi Mahmoud Fayad. According to investigators, Fayad's detention came after police found bank statements during a search of Barakat's commercial properties showing almost daily remittances of money from Fayad to Lebanon.11 The police raided another business in Ciudad del Este a few days later to apprehend Ali Hassan Abdallah, who had been implicated by documents seized in earlier raids. Although Abdallah escaped before the police arrived, they arrested 34-year-old Kassen Hassan Baalbaki, who attempted to destroy computer equipment as the officers entered the building.12

According to Carlos Cálcena, Asuncion's public prosecutor for drug trafficking and terrorism, Barakat's remittances to Hezbollah are believed to have totaled up to $50 million dollars since 1995. The ambassador of Lebanon for Argentina and Paraguay, Hicham Salim Hamdam, recently acknowledged that Barakat had sent funds to Hezbollah, but stressed that it was intended for "humanitarian aid for orphans of Muslims killed in action."13

Since the September 11 attacks, the Chilean authorities have also investigated Hezbollah fundraising in the Triple Frontier. On November 8, the Chilean interior ministry announced that it was investigating two businesses, Barakat Ltd. and Saleh Trading Ltd., owned by Barakat and another Lebanese, Khalil Saleh. Although they were registered as legitimate import and export businesses, Chilean investigators said they were fronts for money laundering. Later that month, the authorities arrested two of Saleh's business associates, Arafat Ismail and Mohamed Ali, and five other Lebanese on charges of illegally financing a terrorist group. They were arraigned in mid-November.14 Ismail's lawyer asserts that his client, who arrived in Chile in August 2001, has nothing to do with the case under investigation other than his association with Saleh and it is not clear whether judicial officials have established any direct links between the detained suspects and Hezbollah.

Preventative Measures

The investigation into Hezbollah financing in the Triple Frontier has coincided with important measures in Paraguay and other countries in the region to eliminate the source of the problem - the lack of government control in the area, the lack of resources to combat criminal activities and rampant corruption among bureaucrats and law enforcement officials.

Paraguay

On September 12, Paraguay deployed around 500 soldiers in the tri-border zone to bolster security and assist police in maintaining security in the area. Moreover, important internal reforms were quickly undertaken. In early October, the head of Paraguay's special anti-terrorism unit, Joaquin Pereira, was replaced.

In addition, Paraguay is cracking down on illegal immigration. In May 2001, American authorities warned the Paraguayan Interior and Justice ministries that 400 foreigners, mostly of Arab origin, had each paid around $3,000 in bribes to obtain permanent residency in Paraguay.15 Since then, a number of officials in consular offices in the United States, Argentina, Brazil and Bolivia were fired for allegedly taking bribes to issue visas and passports to Arab nationals. Court cases already initiated for alleged production of fraudulent public documents involve, among others, the former consul of Miami, Carlos Weiss, and vice-consul Jose Luis Coscia. Weiss is accused of having issued 150 irregular visas, 18 of those to Arab citizens, three of whom are wanted by the US Justice Department. Also involved are the former consul of Salta (Argentina), Juana Maidana de Villagra, who is now in prison awaiting trial, and an official of the Ministry of the Interior, Juan Lugo. The former consul of Santa Cruz de la Sierra (Bolivia), Tomas Lopez Caballero, has been arraigned for furnishing irregular visas to Korean and Pakistani citizens.

Paraguay also began requiring banks to notify the government of large overseas wire transfers and other transactions and has begun sharing this information with the United States.

Argentina

After September 11, Chief Lieutenant Juan Bautista Barrios, head of Squadron 13 of the Argentine border police, stated that he had "received orders to increase safety measures" at the frontier, particularly in the high-traffic Tancredo Neves bridge that links Puerto Iguazu with the Brazilian border city of Foz de Iguazu. Barrios also confirmed at the time that the security forces for the three countries "stay in permanent contact and are in close communication in case it is necessary to undertake an operation."16

Brazil

Brazil has also implemented important security measures since the September 11 attacks, though officials have been careful to state that these measures target potential Al-Qa'ida activities in the region, not Hezbollah. According to the Brazilian minister of justice, Jose Gregori, an anti-terrorist squad was deployed near Iguazu Falls in the Triple Frontier to "ensure that Islamic radicals have not used Brazilian territory to seek shelter."17 However, most Brazilian officials have discarded the possibility that Brazilian citizens of Arab descent have been involved in terrorist activity and tend to point fingers at Paraguay.18 Walter Maierovitch, ex-secretary of the Brazilian anti-drug department and an expert in money-laundering and international mafias, recently said that Paraguay does not appear "to have the means of controlling transnational organizations like the mafia and terrorism" and even suggested that bin Laden intended to transfer his base of operations to Paraguay after Hezbollah "lost its international strength."19

While frequently reiterating Brazil's solidarity with the United States to combat international terrorism, Brazilian officials have nevertheless refused to extradite Barakat or undertake the kind of close cooperation that Paraguay has, stating that these are internal matters which will be handled by appropriate agencies within their own country.

Notes

  1 "'Comandos' terroristas se refugian en la triple frontera" (Terrorist "commandos" hide in the Triple Border), El Pais Internacional S.A., 9 November 2001.
  2 "Triple Frontera: sospechas de 'celulas dormidas' en zona de escasos controles" (Triple Border: suspects of "sleeper cells" in zone of scanty controls), Agence France Presse (AFP), 28 September 2001.
  3 "Paraguan Prosecutor Seeks Suspect," Associated Press (AP), 26 November 2001.
  4 "Argentina, Brasil y Paraguay aumentan controles en caliente Triple Frontera," (Argentina, Brazil, and Paraguay increase controls in the hot Triple Border), AFP, 13 September 2001.
  5 Patterns of Global Terrorism 2000, US Department of State, Office of the Coordinator for Counterterrorism, April 2001. Full text can be viewed at: http://www.state.gov/s/ct/rls/pgtrpt/2000/index.cfm?docid=2437.
  6 "'Comandos' terroristas se refugian en la triple frontera" (Terrorist "commandos" hide in the Triple Border), El Pais Internacional S.A., 9 November 2001.
  7 "Procesan a comerciante libanes por supuesta apologia del extremismo islamico" (Lebanese businessman arraigned for alleged connection with islamic extremism), AFP, 25 October 2000.
  8 "Comunidad arabe continua en la mira de organismos de seguridad" (Arab community continues under security surveillance), ABC Color via EFE Spanish Newswire Services, 13 October 2001.
  9 AP 12 December 2001.
  10 "Comunidad arabe continua en la mira de organismos de seguridad," (Arab community continues under security surveillance), Ultima Hora, via EFE Spanish Newswire Services, 13 October 2001.
  11 "Detienen en Paraguay a presunto nexo de Hezbola" (Alleged link to Hizbollah detained in Paraguay), AFP, 9 November 2001.
  12 "Paraguayan police detain suspected Hezbollah member," AFP, Monday, 12 November 2001.
  13 "Designan ministro en visita para investigar negocios de comerciante libanés" (Appointed magistrate visiting to investigate affairs of Lebanese businessmen), El Mercurio Online (Chile), 10 November 2001.
  14 "Juez chileno dicta orden de arraigo contra dos libaneses" (Chilean judge issues arraignment order against two Lebanese), EFE Spanish Newswire Services, 26 November 2001.
  15 "Larga lista de advertencias de EEUU a Paraguay sobre terroristas en su frontera," (Large list of observations of the US to Paraguay on terrorists in its border), AFP, 21 September 2001.
  16 "Argentina, Brasil y Paraguay aumentan controles en caliente Triple Frontera," (Argentina, Brazil, and Paraguay increase controls in the hot Triple Border) AFP, September 13, 2001.
  17 "Islamic extremists feared in South America," United Press International, 11 October 2001.
  18 "Combate al terrorismo: Brasil aboga por una accion multilateral," (Fighting terrorism: Brazil backs a multilateral action) AFP, 18 September 2001.
  19 "Bin Laden pretendia trasladar una de sus bases en Paraguay," (Bin Laden attempted to transfer one of his bases to Paraguay) AFP, 19 September 2001.


© 2002 Middle East Intelligence Bulletin. All rights reserved.

MEIB Main Page