Reverse Money Laundering and H.R. 3146

In 2003, Stefan Cassella, Deputy Chief of the Asset Forfeiture and Money Laundering Section of the U.S. Department of Justice posited a question: “What about criminals who are using clean money to commit crimes in the future?”  He called this scenario, “reverse money laundering.”  Mr. Cassella concluded that law enforcement needs to look forward, as well as backward.

On July 25, 2007, in response to the question by Deputy Chief Cassella, Congressman Geoff Davis introduced a bill entitled the Combating Terrorism Financing Act 2007 (H. R. 3146), making it a crime to commit domestic “reverse money laundering,” which it defined as: “the transportation of large quantities of cash for the intended promotion of terrorism or other crimes.”

The crime of bulk cash smuggling under Section 371 of the USA PATRIOT Act comprises four elements: 1. The intent to evade the CMIR reporting requirement; 2. Knowingly concealing; 3. More than $10,000 in currency; and 4. Transported or transferred (or the attempt so to do) of such currency in or out of the United States.

The point is that reverse money laundering would seem to circumvent Section 371. Here is a hypothetical: A major bank in the United States is “acquiring” currency from major banks in Paraguay, shipping the money to the U.S.via a cash courier, and then wiring it to designated foreign locations.  Upon arrival in the U.S., the CMIR is filed by the cash courier with the Customs and Border Patrol (“CBP”), and at no stage is the currency concealed.  That being said, the shipment does comprise a number of seals, thus rendering inspection all but impossible, though it is weighed. It is important to note that with so many packages transiting airports in the U.S., perhaps only 5% of packages receive any in-depth scrutiny, most are simply waved through, and the paperwork retained in a perfunctory manner.  Unknown to the cash courier, the ultimate controller of the funds is a Hezbollah bomb maker, who indirectly owns a travel agency from which the currency originates, as well as ensures that the ultimate destination of the money is Hezbollah in Lebanon. Thus, the cash begins clean, and ends up dirty.

Hezbollah undertakes a multiplicity of activities in Paraguay to raise and move money:  Case in point, Assad Barakat, who on the one hand, distributed fake dollar bills, and on the other hand, ran two legitimate businesses as fronts for his activities: an electronics wholesale store called “Casa Apollo” based in Ciudad del Este Paraguay, and Barakat Import-Export Ltda., based in Iquique Chile. In an excellent piece on the subject, Jeffrey Goldberg described the nefarious activities of Hezbollah in the tri-border area, including its use of seed money for small business start-ups, as well as threatening compatriots to cough-up money or see their family members back in Lebanon placed on blacklists.  In return for start-up money, the small business gives to Hezbollah 20% of its gross revenues after the loan is paid off.  Goldberg also noted that it was not unusual for a small business with little revenue to be wiring large sums of money back to Lebanon.  Since 1995, from his home in Ciudad del Este Paraguay, it is believed that Sobhi Mahmoud Fayad, an associate of Assad Barakat, had donated over $50 million to Hezbollah via charities such as Bonyad-e Shahid (the ‘martyr’s organization”), to which he gave $3.5 million.

Recent articles by Chris Zambelis and Ely Karmon have drawn attention to the growing patronage of Hezbollah by Venezuela’s Hugo Chavez.  This takes two forms:  First, there is the allowance by Chavez’s regime of import-export businesses controlled by Hezbollah in the free trade zone of Margarita Island.  Second, there is the allowance of not just a base of operations for Hezbollah among the Wayuu Indians in the West of the country, but also a presence on the Internet via MSN. These are the very same Indians who have been caught in the middle of a turf war between the right-wing paramilitary forces of the AUC and the Revolutionary Armed Forces of Colombia (“FARC”) over the cocaine crops in the Eastern provinces of Colombia.  As a result, a synergy has developed between the Wayuu, FARC, Hezbollah and President Chavez.  It is to be noted that Venezuela is now the second largest customer of the Russian arms industry, from whom among other things, it has purchased 100,000 AK-103 rifles and has agreed to build two Kalashnikov factories in Venezuela by 2010, as well as being in the process of negotiating the purchase of five Project 636 Kilo-class submarines and four Project 637 Amur submarines.  It makes you wonder whether those Americans who buy gas at Citgo gas stations know that a portion of their hard earned dollars are going to fund terror aimed squarely at the United States.

Clearly, the passing of H.R. 3146 is an essential first step in the look forward process.