Sanctions against Hezbollah in Latin America too often limited

Sanctions against terror financiers are believed to be among the most effective tools the U.S. government has in its economic warfare arsenal.

In practice, however, these measures have only a limited impact. U.S. sanctions against Hezbollah in Latin America are a perfect illustration of this.

Since 2004, the U.S. Department of Treasury has periodically sanctioned Hezbollah financiers in Latin America. Yet many remain active in illicit trade and finance, are able to travel abroad, and likely enjoy significant access to the global financial system.

Their defiance highlights the need for urgent countermeasures.

Take, for example, the case of Sobhi Mahmoud Fayad. Fayad was designated by the U.S. Treasury Department in 2006 for serving as a liaison between the Iranian embassy and Hezbollah in the Tri-Border Area (TBA) — the frontier region where Brazil, Argentina and Paraguay intersect. Treasury said he was involved in drugs trafficking and counterfeit U.S. currency.

By all accounts, the Treasury designation should have put him out of business. Yet, 10 years on, Fayad is, at 70, a frequent visitor to Hezbollah's heartland in South Lebanon and a world traveler who seems to have no problem conducting financial transactions thousands of miles away from his home in Paraguay.

As recently as September, he participated in the hajj, the Muslim pilgrimage to Islam's holy places in Saudi Arabia, before spending more than two months in Lebanon. He travelled there from Paraguay, business class, and checked into a five-star international chain hotel upon arrival.

This was not a one-off. Last December he went on pilgrimage to Iraq, after obtaining his Iraqi visa and buying a plane ticket while in Lebanon.

His case is not isolated. Other Hezbollah individuals and entities designated by Treasury in Latin America enjoy the same degree of impunity.

One of them is Sheikh Bilal Mohsen Wehbe, sanctioned in 2010 as being Hezbollah's “chief representative in South America.” He remains one of the leading clerics at São Paulo's Islamic Center of Brazil, regularly appearing in public with other religious and political figures, including the 2015 visit of Iran's Hassan Khomeini to Brazil.

Another one is Hatem Ahmad Barakat, whom Treasury designated in December 2006. His social media accounts suggest he freely travels across the Paraguay-Brazil border while running an electronics and children's toys business in Luanda, Angola.

His brother, Hamze Ahmad Barakat, also sanctioned in 2006, conducts their business similarly, with little concern for Treasury's sanctions.

It took seven years to Brazilian authorities to arrest Hamze in May 2013 for operating a fraudulent scheme in the clothing industry rather than on terrorism charges. Hamze was released shortly after, and his trial is still ongoing. As his social media footprint and commercial registry entries from Brazil suggest, his problems with Brazilian justice are hardly a hindrance to his ongoing activities.

As individuals go, so do companies. Galeria Pagé, a shopping mall in Ciudad Del Este, Paraguay, which the U.S. sanctioned in 2006, remains open to business, having merely rebranded itself as Galeria Uniamericana.

Clearly, Treasury sanctions are not enough to block these activities. What can be done?

As my colleague David Weinberg recently explained,  Executive Order 13224, the tool used for Hezbollah's Latin American designations, was first introduced in the aftermath of the 9/11 terror attacks to disrupt terrorist funders and thwart their efforts to exploit the financial system.

In theory, a designation under the executive order blocks targets from accessing the U.S. financial system and further empowers the U.S. to go after those who offer material support and financial services to terrorists, wherever they may be.

But, outside the U.S., the reach of these measures is limited unless Treasury sustains its initial designations with updated identifying and financial data, and also targets those who provide material support and financial services to designated entities.

Legislation under consideration in Congress could finally exact a price from those jurisdictions that shelter sanctions evaders. Fayad, Wehbe, the Barakats, Galeria Pagé and other Hezbollah-designated entities in Latin America operate mainly in Brazil and Paraguay.

New measures would put both countries on notice and force a choice between enforcing U.S. anti-terror finance sanctions and jeopardizing relations — inancial and diplomatic — with Washington.

One of the greatest legacies of the post-9/11 world is America's ability to fight terrorism through economic warfare. But weapons are only effective over time if they are recalibrated or sharpened.

This will be especially necessary in the fight against Hezbollah's terror financiers in Latin America.

Emanuele Ottolenghi is a senior fellow at the Foundation for Defense of Democracies. Follow him on Twitter @eottolenghi.