Aug. 26, 2006, 10:36PM

South American scams funding Hezbollah?

The U.S. believes so and has sent teams to tri-border area to help fight
money laundering

Copyright 2006 Houston Chronicle South America Bureau 
CIUDAD DEL ESTE, PARAGUAY - Here in South America's busiest contraband and
smuggling center, police recently raided a warehouse that could burn 1,200
counterfeit compact discs per hour.
Each CD cost 25 cents to make and was sold on the street for $2 or $3. All
told, said one Paraguayan official, sales of the pirated discs total $400
million annually.
Clandestine CD factories are just one of myriad schemes to generate huge,
under-the-table profits in Ciudad del Este. U.S. officials say some of this
cash goes to Hezbollah, the Shiite militia group that Israel has spent the
last month battling in southern Lebanon and which has been blacklisted as a
terrorist organization by the U.S. State Department.
To keep a closer watch on the tri-border region - where the frontiers of
Paraguay, Brazil and Argentina converge and home to thousands of Lebanese
Muslims - the Pentagon has dispatched small teams of U.S. troops to
Paraguay, while the Department of Homeland Security has sent so-called
"trade transparency units" to help crack down on money laundering and other
financial crimes.
"Substantial financing for Hezbollah is coming from the tri-border area,"
said Daniel Glaser, the U.S. Treasury's assistant secretary of state for
terrorist financing and financial crimes. "The problem very much has not
been solved."

Frustrating task

Since 9/11, U.S. officials have scoured the globe trying to shut down
underground financial networks that support militant Islamic groups.
But their efforts in Ciudad del Este show how frustrating the task can be.
Scams range from contraband and cocaine smuggling to producing phony
import-export invoices.
Tracking the tangle of paperwork is a nightmare.
Investigators say it's nearly impossible to penetrate the tight-knit
Lebanese diaspora of around 30,000 that live and work in Ciudad del Este and
Foz do Iguacu, just across the border in Brazil.
There have been few attempts to put the smuggling center out of business
because so much commerce creates jobs, and well-to-do shop owners often
bribe local officials and contribute to political candidates.
"If you want to win an election, it wouldn't even occur to you" to crack
down on the tri-border area, said Juan Belikow, an Argentine expert on
underground economies who teaches at the University of Buenos Aires.

Shortage of evidence

Paraguay lacks an anti-terrorism law and no one has ever been arrested here
on terror charges.
In the past five years, authorities have convicted only two Hezbollah
financiers in the tri-border area - and, like Al Capone, they were
imprisoned for tax evasion.
This shortage of hard evidence linking the smuggling trade to
Hezbollah-sponsored terrorism has some local officials complaining that
Washington overstates the threat.
"Real evidence has never been found," said Augusto Lima, the Paraguayan
representative of a joint police task force, set up with Argentina and
Brazil, to monitor the region. "And if we don't have real evidence, we can't
accuse people."
Authorities in Brazil make the same claim, even while admitting that all
kinds of criminals operate in the area.

Few border controls

The streets of Ciudad del Este are jammed with cut-rate shopping malls and
rickety stalls selling everything from fishing rods and pirated DVDs to
Foreign currencies abound. The chatter of buyers and sellers making deals in
English, Spanish, Portuguese, Chinese and Arabic fill the air.
With no effective passport controls between Brazil and Paraguay, tens of
thousands of people stream across the Friendship Bridge connecting the two
countries every day, lugging bags, boxes and backpacks filled with
merchandise that is often smuggled into other countries and sold at cut-rate
Luis Muniagurrias, head of the government tax and intellectual property
rights office in Ciudad del Este, estimated that between $12 billion and $24
billion in mostly underground commerce moves through the region each year.
"This place is the Wild West of piracy and capitalism," said Larry Johnson,
who was deputy director of the State Department's office on
counterterrorism. "You can make enormous amounts of money. ... The question
is whether it's used for terrorism."
Lebanese expatriates in the triple-border area stress their support for
Hezbollah - which has two Cabinet members and 14 legislators in Lebanon's
national government - is not financial.
"Hezbollah is a political party, so it is like saying Americans sympathize
with the Democratic Party," said Mijail Meskin Bazas, Syria's Honorary
Council in Ciudad del Este.
"We don't send money," said a Lebanese Shiite named Ali, as he stared at a
TV in a shopping mall that was tuned to an Iranian station. "God will send
money to Hezbollah. Syria will send money. Iran will send money."
Indeed, some terrorism experts point out that the majority of Hezbollah's
financial muscle comes from Iran and Syria and contributions from South
America pale by comparison.
However, Argentine investigators believe that Hezbollah operatives working
out of the tri-border area were responsible for the 1992 bombing of the
Israeli Embassy in Buenos Aires that killed 29 people and a 1994 suicide
truck-bombing that flattened a Jewish community center in the city, killing
In testimony in March before the Senate Armed Services Committee, Gen. Bantz
Craddock, chief of the U.S. Southern Command, said the tri-border area
remains "a refuge for terrorist support and fundraising activities."

Businessman convicted

Washington's main evidence is the 2002 conviction of Assad Ahmad Barakat, a
Lebanese businessman who arrived in Paraguay in 1985 after fleeing the civil
war in his homeland.
The U.S. Treasury Department describes Barakat as a high-level Hezbollah
financier who used his electronics wholesale store in Ciudad del Este as a
cover to raise funds for the organization.
Barakat was arrested for tax evasion in 2002 and is serving a 6 1/2 -year
prison term in Paraguay.
According to Paraguayan officials, his remittances to Hezbollah since 1995
totalled at least $50 million.
U.S. Treasury officials also claim Barakat strong-armed other Lebanese
shopkeepers in Ciudad del Este to make donations to Hezbollah.
But tracing donations to Hezbollah's military wing is nearly impossible.
For example, some donations may go to Islamic charities run by Hezbollah,
which operates health and education programs in southern Lebanon.
Unlike in the U.S., it is legal in Paraguay to donate money to Hezbollah's
political wing.
"The funds can be entirely legal until they are used in military
operations," Johnson said.
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