On a weekly basis, staggering sums of money and merchandise stream through New York and Miami to a Paraguayan consumer mecca with a massive black-market economy.
Situated in the so-called Tri-Border Area of Paraguay, Argentina and Brazil, Ciudad del Este is renowned for selling everything from counterfeit electronics products to contraband cigarettes at steep discounts with low taxes.
But increasingly, U.S. authorities have been developing several money-laundering cases targeting the flow of billions through the Paraguayan hub, which they consider a giant washing machine for Latin American drug profits, knockoff consumer goods and terrorist fund-raising.
Authorities say some of that money — minus 15 percent in fees charged by Paraguayan and other currency exchanges — ends up in the coffers of Hezbollah, a U.S.-designated terrorist group aligned with Iran. The Shiite militant group has gained political and financial influence far beyond its base in Lebanon, extending all the way to South America, New York and Miami.
This month, a Lebanese businessman who owns a major money-exchange business in Ciudad del Este is expected to be extradited to Miami and eventually New York. Nader Mohamad Farhat is perhaps the biggest Tri-Border Area catch yet for the feds.
“Farhat is a known money launderer for narcotics organizations and other illicit organizations,” New York federal prosecutor Charles Kelly declared in a court filing.
In a Twitter feed on his case, one of Farhat’s supporters decried his arrest on May 17, 2018, by Paraguayan authorities assisted by Drug Enforcement Administration agents. DEA agents later took a statement from Farhat while he was in custody. “Where is the sovereignty of Paraguay?” the Feb. 22 Twitter message said, defending Farhat’s fight against extradition to Miami and New York. The Lebanese Embassy in Asuncion, Paraguay’s capital, has pressured the Paraguayan government to reject the U.S. request for his extradition.
Farhat is connected to at least four criminal cases in Miami and New York involving hundreds of millions of dollars in wire payments for consumer products as well as drug-related money transfers around the globe, according to federal court records and law enforcement authorities. Among the case investigators are FBI, Homeland Security and other federal agents with the Joint Terrorism Task Force, which was expanded significantly since the 9/11 terrorist attacks.
U.S. authorities in Miami and New York are stepping up the use of money-laundering laws to disrupt Hezbollah’s alleged financial network in the Tri-Border Area, mainly because it is so difficult to prove that the international circulation of money directly supports terrorist activities aimed at Israel and other Western allies.
A counter-terrorism expert with the Washington, D.C., nonprofit Foundation for Defense of Democracies said Farhat’s planned extradition is an important development because “his case reveals the size of Hezbollah’s money-laundering networks in the Tri-Border Area and it also exposes the laissez-faire approach of the Paraguayan government” towards corruption.
“The U.S. has a problem, too,” said Emanuele Ottolenghi, a senior fellow at the foundation. “Hezbollah has elected to launder South American drug money through potentially hundreds of companies in the United States. U.S. authorities need to invest more resources investigating and prosecuting these criminal schemes.”
The U.S. Attorney’s Office in Miami confirmed that Farhat is scheduled for extradition to the United States, but declined to comment about whether he has been charged with money laundering here — despite mention of such a Miami case in New York federal court records. Two similar criminal cases filed in New York portray Farhat as a money man who moves vast funds to and from the United States and other parts of the world.
Farhat and one of his customers, Mahmoud Ali Barakat, who imports cellphones from the U.S. to his chain of stores in Paraguay, have been charged together with conspiring to commit money laundering by promoting drug trafficking, unlicensed money transmitting and wire fraud. Farhat, also known as “Diesel,” is also charged alone with money laundering stemming from an undercover federal operation involving purported drug proceeds. Barakat, who was extradited in November to New York, was not implicated in that sting.
While opposing bail for Barakat, Kelly, the prosecutor, accused him of orchestrating a dozen bulk-cash pickups and deliveries in the Northeast and committing “trade-based money laundering” for third parties involving suspiciously high payments for electronics products totaling millions of dollars. Kelly also said that Barakat only used Farhat’s money-exchange business, Cambios Unique S.A., for his money transfers to the United States. (Technically, the company is owned by Farhat’s wife, Renata Wu.)
Kelly pointed out the Farhat-Barakat case is related to another money-laundering conspiracy indictment filed in New York, charging seven defendants in November. That case accuses two owners of several electronics and mobile-phone businesses in New York and Miami of using the import-export companies to transfer proceeds from financial crimes and the sale of narcotics in the United States to drug dealers in South America.
The lead defendant is Enayatullah Khwaja, a New Yorker who owns and manages Tronix Telecom Corp., and also manages Sysco International, which share a warehouse in Miami. His cousin, Abdulrahman Khwaja, also named as a defendant, is a New Yorker who owns and manages similar businesses, including ISK Corp., Solid Wireless and Solid Electronics in Miami.
Kelly said Barakat bought cellphones from the Khwajas’ companies, using Farhat’s money-exhange business to transfer payments to them.
In another court filing, Kelly said that Farhat and Barakat “helped to orchestrate the trade-based money laundering scheme together with defendants in the [Khwaja] case.” He also said “bulk cash payments with illicit proceeds were often directed in Paraguay [by Farhat and Barakat] for delivery to defendants in New York, using other defendants in the [Khwaja] case.”
Defense attorneys for Enayatullah Khwaja as well as Barakat did not return messages seeking comment. In a court filling, Barakat’s defense attorney, Robert Feitel, downplayed his client’s liability.
“While a charge of international money laundering is a serious matter, my analysis of the case against Mr. Barakat suggests that the weight of the evidence against him is marginal,” Feitel wrote, adding that Barakat was unaware of Farhat’s alleged laundering of criminal proceeds through his money-exchange business.
Abdulrahman Khwaja’s lawyer said his client is a legitimate businessman who denies any role in money-laundering activities. “He certainly has no knowledge of or involvement in any terrorist activity,” attorney Roland Riopelle said.
Farhat not only has direct links to the Khwaja and Barakat cases but his currency-exchange business in Paraguay is also implicated in a Miami money-laundering case, according to federal law enforcement sources.
Farhat’s money-exchange company — located in the Jebai Center, the most upscale shopping mall in Ciudad del Este — helped finance the distribution of counterfeit electronics goods as well as wire transfers totaling millions of dollars, the sources said.
One of his customers was Ali Nasreeddine Kassir, a Lebanese-born businessman who pleaded guilty in Miami federal court in November to passport fraud and conspiring to commit money laundering. According to his plea agreement, Kassir used his shipping company, An Imex Inc., to import counterfeit Apple iPhone batteries and Samsung car chargers from China. In Miami, Kassir exported the products via direct cargo flights to electronics retailers in Ciudad del Este.
After he was caught orchestrating the illicit shipments in 2015-17, Kassir used another company, 4GGlobal Trading, as a shell in an attempt to evade detection by U.S. Customs and Border Protection, according to a statement filed with his plea deal.
Over a three-year period, Kassir withdrew almost $155 million from his An Imex account, the majority of the funds for wire transfers, the statement said. Yet, despite his business claiming to consist almost entirely of exporting goods to Paraguay, the value of the products he reported to U.S. Customs was about $85 million.
The glaring discrepancy totaled almost $70 million in suspicious wire transfers.
In court records filed last year, Kassir also claimed that not all of his electronics exports to Paraguay were counterfeit. He asserted that Info Tech S.A., a Paraguayan customer of his distribution business, owed An Imex about $2.7 million for Sony PlayStation and other gaming consoles.
At the end of January this year, however, Paraguayan authorities seized 3,000 video-game consoles from Info Tech, after Sony’s South American supplier, Solutions 2 Go, questioned the integrity and value of the gaming machines being sold to the Brazilian market. A Paraguayan prosecutor alleged the confiscated consoles were actually being sold to launder money for financing terrorist activities — though no organization was cited in published accounts. Neither Kassir nor his business, An Imex, were mentioned in the seizure of Info Tech’s merchandise.
In Miami, Kassir now faces between five and seven years in prison at his sentencing before U.S. District Judge Marcia Cooke on March 29. He also must pay a forfeiture judgment of $150,000.
His defense attorney, Jeffrey Weiner, declined to comment.