WASHINGTON (Reuters) - The United States targeted two Lebanese money exchange houses, accusing them on Tuesday of helping launder funds for an international drug trafficking ring and financing the Lebanese militant group Hezbollah.
The U.S. Treasury Department labelled the exchange houses, Kassem Rmeiti and Halawi Exchange, “primary money laundering concerns,” which is likely to cut them off from the U.S. financial system.
The Treasury and the U.S. Drug Enforcement Administration said that tens of millions of dollars in drug proceeds and other illegal funds moved through the exchange houses, which do most of their transactions in cash.
The move is part of a multi-year probe that has exposed what the U.S. government says are tight links between South American drug traffickers and Middle Eastern militant groups such as Hezbollah.
Hezbollah is a Shi‘ite Islamist guerrilla and political movement founded with Iran’s help after the Israeli invasion of Lebanon in 1982. Washington considers Hezbollah a terrorist group.
“Drugs and terrorism co-exist across the globe in a marriage of mutual convenience,” said Derek Maltz, who heads the DEA’s Special Operations Division, in a briefing with reporters. He said a conservative estimate is that half of the world’s “terrorist” organizations have links to drug trafficking.
South American drug traffickers are eager to expand into lucrative markets in Europe and the Middle East via new shipment routes through West African countries, he said.
And militant groups like Hezbollah have found it harder to get money directly from governments in the wake of the September 11, 2001 attacks on the United States, when the U.S. government sharply expanded a crack-down on financing.
U.S. officials say Hezbollah receives money from Iran, which has also been hit with financial sanctions, including on its oil exports, over its nuclear program.
“Hezbollah is both a full-fledged terrorist organization, lavishly funded over the years by Iran, and an enterprise that increasingly turns to crime to finance itself as the economic pressure on Iran mounts, and Iran’s financial situation becomes more tenuous,” said David Cohen, Treasury’s undersecretary for terrorism and financial intelligence.
Neither Kassem Rmeiti nor Halawi Exchange could be reached for comment after normal business hours in Lebanon. On its website, Halawi says it has been helping customers with money exchange and remittances since 1960.
Officials described an international network, where drug traffickers in South America send cocaine to European markets via West Africa, with its notoriously lax law enforcement. Drug proceeds get laundered through exchange houses in Lebanon and other parts of the Middle East, these officials said, with some of the funds getting channelled to Hezbollah.
The drug ring also moves proceeds through bulk-cash smuggling, used car dealerships in the United States and consumer goods shipments to Asia, the U.S. officials said.
The U.S. government first moved against the network in 2011, designating its alleged leader, Ayman Joumaa, a “drug kingpin,” allowing the government to seize his assets. They said the network was doing as much as $200 million a month in business.
They also targeted the Lebanese Canadian Bank, the eighth-largest bank in Lebanon at the time for allegedly helping the Joumaa network launder money, and last year seized $150 million of its assets.
“As today’s findings lay out, both Rmeiti and Halawi increased their business with drug kingpins and money launderers over the last few years to fill the void left when the operations of LCB and two other exchange houses in Joumaa’s network were disrupted by our actions in 2011,” Cohen said.
The move against the exchange houses is the first time a non-bank has been targeted under the U.S. anti-money laundering law known as Section 311 of the Patriot Act, passed after the September 11 attacks.
It highlights how crime networks are turning to less well-regulated financial institutions to launder money as U.S. sanctions on more established banks start to bite, U.S. officials said.
“These businesses are in the business of taking in bulk cash. That is a money-laundering risk,” Cohen said about the exchange houses. “We are going to continue to focus on that, both domestically and internationally, as we take steps to combat money laundering and illicit financial activity overall.”
Editing by Warren Strobel and Tim Dobbyn