Outcomes of the Joint Plenary meeting of the FATF and GAFISUD, Mexico City, 22-24 June 2011

Under the Mexican Presidency, the first joint FATF-GAFISUD Plenary meeting was held in Mexico City on 22-24 June 2011. The meeting was co-chaired by the FATF and GAFISUD Presidents.

FATF Decisions

The FATF took important new steps to protect the international financial system from abuse by:

• Producing two public documents as part of its ongoing work to identify jurisdictions that may pose a risk to the international financial system:
• FATF Public Statement on jurisdictions with strategic anti-money laundering and combating the financing of terrorism (AML/CFT) deficiencies.
• Improving Global AML/CFT Compliance: on-going process - Jurisdictions with strategic AML/CFT deficiencies for which they have developed an action plan with the FATF

• Issuing a statement on the progress made by Argentina in addressing deficiencies identified in its mutual evaluation of October 2010.

• Adopting the mutual evaluation reports of the State of Kuwait and the Sultanate of Oman.

• Publishing a detailed examination of Organised Maritime Piracy and Related Kidnapping for Ransom, Trafficking in Human Beings and Smuggling of Migrants and Money Laundering and Corruption.

• Publishing Guidance on Financial Inclusion.

• Continuing its work on revision of the FATF Recommendations and preparation for the fourth round of mutual evaluations.

AML/CFT improvements in Greece

The FATF welcomes Greece’s significant progress in improving its AML/CFT regime and notes that Greece has met its commitments in its Action Plan regarding the strategic AML/CFT deficiencies that the FATF had identified in February 2010. Greece is therefore no longer subject to monitoring under the FATF’s ongoing global AML/CFT compliance process. Greece will continue to work with the FATF to further strengthen its AML/CFT regime.

Statement on the progress made by Argentina

The FATF heard Argentina´s report on progress made since its first follow-up report presented in February 2011 and recognised the important legislative efforts aimed at improving the criminalisation of money laundering. Based on the initial analysis of the recent legal amendments, the FATF expressed some specific concerns that there are still shortcomings in the criminalisation of money laundering, and further clarification is required. Substantial progress to improve the criminalisation of terrorist financing has not yet taken place, and there are a large number of other AML/CFT deficiencies remaining. The FATF remains seriously concerned about the risks that such deficiencies may pose, as identified in “Improving Global AML/CFT Compliance: on-going process”, and will continue to review progress, in the context of measures that the FATF has agreed to follow under its enhanced follow-up procedures for members insufficiently in compliance with the FATF Recommendations.

The FATF expects more substantial progress by Argentina by October 2011. In particular, the FATF expects Argentina to fully address the FATF´s concerns regarding the criminalisation of money laundering in accordance with international standards, present to the FATF a draft law criminalising terrorist financing in accordance with international standards, and inform about the progress in addressing the other AML/CFT deficiencies. As part of this discussion, the FATF reaffirmed the responsibility of all members to observe a high level of compliance with the FATF Recommendations in an expedited manner.

Mutual Evaluation of the State of Kuwait and the Sultanate of Oman

The FATF discussed and adopted two mutual evaluation reports assessing the compliance of two Gulf Cooperation Council members, the State of Kuwait and the Sultanate of Oman against the international standards for combating money laundering and terrorist financing – the 40+9 Recommendations.

Summaries of these mutual evaluations will soon be available on the FATF website, and the full reports will be released in the coming weeks.

There is currently no evidence of significant money laundering and no major terrorist activity has been recorded in the State of Kuwait. However, Kuwait’s financial sector is growing rapidly and thus may create a potential environment for such activities. The assessment team for this evaluation, composed of staff of the International Monetary Fund (IMF), concluded that the Kuwaiti AML/CFT framework had some deficiencies: terrorist financing is currently not criminalised, the money laundering offence does not cover all serious predicate offences, the Kuwaiti financial intelligence unit (KFIU) has not been established as an independent agency carrying out all core functions set out by the FATF standards, and there are shortcomings in the AML/CFT supervisory framework for some financial institutions and designated non-financial businesses and professions (DNFBPs).

The evaluation of the AML/CFT regime of the Sultanate of Oman was conducted jointly by the FATF and the Middle East and North Africa Financial Action Task Force (MENAFATF). The level of compliance with the FATF Recommendations for the AML/CFT regime of Oman is comparatively high for the region, and the legal framework is generally sound. However, the Omani AML/CFT Law was only recently updated, and executive regulations must still be issued. In addition, the overall effectiveness is generally lacking, parts of the terrorist financing legal framework need to be improved and the number of money laundering cases needs to be significantly raised.

With the adoption of the mutual evaluation reports of the State of Kuwait and the Sultanate of Oman, the FATF concluded its third round of mutual evaluations that started in 2005 and comprised 35 FATF jurisdictions and five members of the Gulf Cooperation Council.

Organised Maritime Piracy and Related Kidnapping for Ransom

In recent years, there has been a growing concern over organised piracy on the high seas and kidnapping for ransom. These activities present a number of a potential risks to the international financial system and challenges to the law enforcement and regulatory framework worldwide. The FATF has completed a study that provides an overview of this problem and analyses the related money flows to the extent that this is possible. In addition to informing the work of other international bodies dealing with this issue, the report, which will be published shortly, will also serve as a useful source of general information on the subject.

Human Being Trafficking and Smuggling of Migrants

Criminals are increasingly turning to the trafficking of human beings and the smuggling of migrants given the high profitability of these illegal activities. The money generated by such activities finds its way into the financial system. The FATF has carried out a study which describes the money flows related to these two distinct problems and attempts to assess their scale. The report, which will be published shortly, provides a series of red-flag indicators for the various destination / origin countries and different sectors to help financial institutions to better detect related suspicious financial activity.

Money Laundering and Corruption

Corruption continues to be a significant public policy issue throughout the world, and for that reason work related to anti-corruption was identified as an objective under the Mexican Presidency. In the larger framework of its work on corruption, the FATF has prepared a study on the links between corruption and money laundering. The report, which will be published shortly, identifies key vulnerabilities within the current AML/CFT framework and discusses some of the obstacles to the recovery of corruption. In addition to providing the basis for further examination of related issues, the report will serve as the catalyst for future FATF work in developing guidance or best practices on AML/CFT measures relevant to combating corruption. The FATF will continue to work on issues related to the use of AML/CFT tools in the fight against corruption.

Guidance on Financial Inclusion

Financial inclusion is an important policy objective for many countries, and the implementation of AML/CFT measures should not become an impediment to financial inclusion. However, an overly cautious approach to AML/CFT safeguards could have the unintended consequence of excluding legitimate business and consumers from the financial system. In collaboration with the World Bank and the Asia Pacific Group on Money Laundering (APG) and in consideration of the objectives set by the Mexican Presidency, the FATF has completed work on guidance that will help in developing AML/CFT measures that are in line with financial inclusion goals without compromising the overall purpose of combating crime. In providing this guidance, the FATF is contributing to the common objective of the G20 in this area as agreed at the Seoul Summit of November 2010. The FATF will continue to strive to ensure that the objectives of financial inclusion and AML/CFT are complementary. The report will be available on the FATF website shortly.

Revision of the FATF Recommendations and Preparation for the Fourth Round of Mutual Evaluations

The FATF continues its work to revise the FATF Recommendations to ensure that they will continue to provide a comprehensive set of means to combat money laundering and terrorist financing, and to build on the experience of the 3rd round of mutual evaluations. The FATF is committed to a constructive engagement with all stakeholders, and is issuing a second public consultation document (pdf, 438 Kb) on a range of issues where changes to the Standards are being considered. This covers important issues such as:

• Clarifying beneficial ownership requirements (Recommendations 5, 33 and 34)
• Ensuring no inconsistency between AML/CFT and data protection / privacy requirements
• Creating an obligation for group wide compliance programmes for financial groups
• Enhancing international cooperation (Recommendation 40)
• Promoting a risk based approach to supervision
• Strengthening measures in relation to politically exposed persons
• Enhancing the transparency of wire transfers
• Implementing targeted financial sanctions in the context of terrorist financing and proliferation financing
• Strengthening and clarifying the requirements for financial intelligence units and law enforcement authorities

The President of the FATF, Mr. Luis Urrutia, thanked the FATF members for their decisive support to achieve the objectives set at the outset of his tenure and wished the new President, Mr. Giancarlo del Bufalo of Italy, and the new Vice-President, M. Bjorn Skogstag AAMO of Norway, Godspeed.

Luis Urrutia Corral

FATF President

FATF to revise money laundering status for Argentina

The Financial Action Task Force (FATF) announces today the results of a review of Argentina’s mechanisms to control money laundering activities in the country. The announcement will take place during the last day of the organization’s Council summit at Mexico City. No alterations of the Argentinean status are expected. Although some revision is anticipated, no sanctions are expected.

Yesterday Justice Minister Julio Alak delegation sources said that the FATF has acknowledged Argentina’s effort to fight money laundering. During its plenary session, the organization recognized that Argentina had moved forward in its prevention and fight against money laundering activities.

Alak spoke before the assembly and expressed that the new law recently passed by Congress, which includes stricter measures for those involved in money laundering activities, “effectively complies with all the organization’s recommendations.”

The Financial Action Task Force is an inter-governmental body whose purpose is the development and promotion of policies, both at national and international levels, to combat money laundering and terrorist financing. The FATF develops global standards for combating money laundering and terrorist financing.

Source: Buenos Aires Herald

Argentina targets money laundering in football

Argentina's government announced tough new rules to combat money laundering in football on Wednesday, requiring detailed reports on transactions involving many more people than just players and staff.

Argentina's Financial Information Unit published its regulations in response to pressure from the global Financial Action Task Force, which provides anti-money-laundering guidelines to governments worldwide and began targeting football in 2009.

The rules require the Argentine Football Association and every club in the top two divisions to file reports not only on everyone on the payroll who makes at least 60,000 pesos ($13,800) a year, but everyone they do business with as well.

That includes not just league officials, players, owners and staff, but also corporate sponsors, media figures, investors in players and team property, agents and government officials.

And the income they must report includes not just salaries, but outside bonuses and prizes, loans and deals for image rights, as well as in-kind payments such as housing, cars, and financial deals involving family members.

Those who fail to comply could be fined up to 100,000 pesos ($23,000) or 10 times the amount of money involved, whichever is greater.

Many Argentine clubs are deeply in debt despite the vast sums of money that flow through the country's football industry.

Gerardo Molina, chief executive of Euroamericas Sports Marketing, told The Associated Press last year that a study by his company showed Argentina has been the world's top exporter of players, with 2,204 sold or transferred to clubs abroad in 2010, topping Brazil's 1,674. Selling the rights to these Argentine players to clubs in Europe and around the world generated about $500 million that year, he said.

The Argentine watchdog agency says football is being challenged by organized crime like never before, citing a 2009 study by the global task force that declared football particularly vulnerable to money laundering, tax evasion, political corruption and other crimes, including even trafficking in human beings.

The agency's chief, Jose Sbattella, described football as a pit of temptations in a preface to the new rules, which were announced in the official government bulletin.

''The international organizations in question maintain that the sport today faces new threats and challenges that come along with commercial activity, exploitation of young players, doping, corruption, racism, illegal betting, violence, money laundering and other activities,'' Sbattella wrote.

Money laundering tricks range from basic to complex and sophisticated, the agency warned, including cash, international transfers, fiscal paradises, shell companies, and the illegal use of non-banking professionals to move money. In particular, selling rights to a player or team's image for undeclared amounts was being increasingly used to evade taxes, it said.

''The amounts of money invested in football have grown mainly as a consequence of the increase in television rights and corporate sponsorships, and at the same time, the labor market for professional football players has seen unequaled globalization, so that an ever-larger number of players are contracted by foreign teams, and the money being transferred around the world has reached surprising levels,'' the agency added.

Argentina's government has toughened all sorts of reporting rules in recent months in hopes of staying off the Financial Action Task Force's ''gray list'' of nations where financial transactions carry a high risk of criminal activity. The label can increase the overall cost of doing business in a country.

The controls on Argentine football had been expected since December, when AFA agreed to more government supervision and tax compliance in exchange for receiving more tax dollars for television rights. As a result, AFA gets about 900 million pesos (more than $200 million) a year to televise games for free through its ''Football for All'' program.

The watchdog agency noted that its new rules came after numerous consultations with AFA, the clubs and the players' union.

Source: FOX News

Paraguay called financial hub for terror and crime

Ralph Nieves, a wiry ex-NYPD narcotics detective, lived through the aftermath of Sept. 11, 2001, in Manhattan. That is why what he discovered about a particular part of Paraguay during a recent assignment there has so disturbed him.

Working under a U.S. government contract to carry out polygraph examinations of public officials in the country, Nieves said he discovered evidence of pervasive corruption among some police and military units.

It is a situation other law enforcement officials believe has contributed to parts of Paraguay being a terrorist haven where al-Qaida, Hezbollah and allied groups have been for years.

As a result, Paraguay's borders with Brazil and Argentina -- an area called the "tri-border" -- are being increasingly viewed by investigators, as well as American diplomats, as the vulnerable underbelly of the U.S. Ciudad del Este, Paraguay's second largest city,which is suspected of being a financial hub for terror and organized crime groups.

Some American investigators also believe the area's porous borders make it an ideal springboard for terrorists to make their way to the U.S. circuitously through Mexico and the Caribbean by using a variety of smuggling venues.

"Every major criminal organization in the world has a criminal representation in Ciudad del Este," Nieves, 63, said in a recent interview.

The lawlessness of the region makes it a threat for future terrorist financing and action in New York, Nieves said. He isn't alone in his concerns.

"It is being watched," Rep. Peter King, the ranking Republican on the House's Homeland Security Committee, told Newsday recently when asked about the tri-border zone.

Hezbollah, an umbrella organization for Shia Muslims, which started in Lebanon, is believed to have laundered $10 million annually through the area, King said.

Martin Ficke, former head of Immigration and Customs Enforcement in New York and now director of operations for the Jericho-based investigative firm SES Resources Ltd., said the tri-border is a continuing concern for money laundering. Ficke, who worked with the El Dorado money laundering task force, said agents were looking to see how readily terrorists could rely on narcotics networks in Paraguay to move cash to support terror operations. He wouldn't comment further.

Officially, the U.S. Department of State says southern Paraguay has yet to sustain an "operational" presence for al-Qaida, Hezbollah and Hamas. King also doesn't believe al-Qaida is present in the area. But there are documented cases where members and sympathizers of Hamas, a militant Palestinian organization, and Hezbollah have engaged in money laundering, extortion, bombings and other crimes inside Ciudad del Este and surrounding areas. Back in the 1990s, suspects in the bombings of South America's Jewish communities were traced to the area.

Some U.S. officials also believe an al-Qaida ally, a shadowy terrorist group known as Lashkar-e-Taiba, which became active in Kashmir in the 1990s, is now operating in the region. Earlier this year, a Manhattan federal judge sentenced a Baltimore man to 15 years in prison for traveling to Pakistan for terrorism training at one of the group's camps.

A report prepared by the U.S. Embassy in Paraguay in April said the country doesn't have effective ways to deal with money laundering and terrorist financing but does try to cooperate in counterterrorism efforts. Judicial and police corruption were concerns, said the report.

In May, MSNBC ran a brief interview by correspondent Pablo Gato with a young Arab Muslim sympathizer of Hezbollah in Ciudad del Este who threatened to attack the U.S. if Iran was targeted.

"In two minutes, Bush is dead," the man told MSNBC of the threatened consequences of a U.S attack.

While those remarks seem like braggadocio, some U.S. officials have been wary of Hezbollah members infiltrating the United States through Mexico to carry out acts of terror. Washington has been pouring millions into Paraguay to try to strengthen its legal institutions, which is why Nieves, who is a private investigator in the Bronx, was working there.

Nieves took polygraph exams of nearly 80 cops, customs officials and military officers. They were applicants for positions in a special customs task force aimed at improving border controls in Paraguay that was to be funded by American aid dollars.

According to Nieves, one of a few U.S.-based Spanish-language polygraphers active in the business, the officials easily opened up to him. After Nieves assured them that admissions of participating in routine graft -- known locally as "la coima" -- wouldn't get them in trouble, the applicants said they believed criminals were tipped off to investigations by law enforcement officials. In some cases, local prosecutors warned smugglers of raids so they could dispose of contraband, Nieves said.

One customs officer said that some higher-ranked customs officials knew all of the organized crime leaders and provided them with information. Some national police also took part in executions on the border with Brazil near the town of Pedro Juan Caballero, said the official, adding that the killings involved disputes over smuggled goods.

The applicants painted a picture of a wild-west atmosphere where legitimate law enforcement was intimidated by criminals and corrupt higher officials.

"They mentioned terrorists, every organized crime group, al-Qaida, the Chinese," recalled Nieves of his debriefings.

One American law enforcement consultant who didn't want to be identified because he does a lot of business in Paraguay said the country's customs service is prone to corruption because of the low wages officials are paid. But even higher pay won't bring speedy reform, he said.

"They don't look at it as corruption. It is part of the culture," he said. "Everybody takes a piece of the government income."

"Most of those people who were coming forward were decent people. Unfortunately, the circumstances are overwhelming for them," Nieves said about the corruption.

Nieves thinks the United States could benefit by developing its own network of paid informants within Paraguay's customs and border police as an early warning system against terrorism.

"Everyone I met were people we could flip," he said.

http://www.newsday.com/news/nationworld/ny-nypara0101,0,7656260.story

Jersey lawyer criticises inconsistency of EU money laundering 'white list'

A Jersey lawyer specialising in the field of money laundering and financial services regulation has questioned the validity of the European Union's 'white list' of countries whose money-laundering controls are considered to be equal to those of EU member states, and which notably excludes leading offshore fund jurisdictions in Europe and the Caribbean.

Stephen Platt, an English barrister and chairman of BakerPlatt Group, queries the inclusion on the list of countries such as Russia, Argentina and Mexico, as well Australia and Canada, which have been adjudged to be less than 25 per cent compliant with the international standards established by the Financial Action Task Force.

Platt describes as "bewildering" the suggestion that the white list countries have higher standards of anti-money laundering controls than leading offshore financial services jurisdictions including the UK's Crown Dependencies.

"Having researched the background to some of the countries included, we question why countries that fall behind recognised international standards are on the list, while finance centres such as Jersey, the Bahamas and the Cayman Islands are not," says Platt, who advises governments and regulators on the implementation of regulatory and anti-money laundering rules.

An analysis by BakerPlatt and its alliance partner in London, Seven Bedford Row, notes that the first mutual evaluation report on Russia in 2001 by the European Committee on Crime Problems noted as a "critical deficiency" the country's lack of comprehensive laws and regulations implementing international standards on money laundering.

Although a second evaluation in 2004 noted significant improvements, it also found that numbers of investigations, prosecutions and convictions for money laundering were falling and know your customer procedures remained deficient.

A report on Argentina by Gafisud, a regional FATF offshoot for South America, noted inherent weaknesses in legislation that had the effect of impeding successful prosecution of money laundering, while no offence of terrorist financing existed. The country was criticised for its failure to provide statistics in anti-money laundering areas, preventing an assessment of the implementation of core requirements from being carried out.

The FATF's September 2004 report described the application of anti money laundering measures in Mexico as somewhat haphazard, and said the lack of mutual legal assistance legislation not only inhibited the country's ability to co-operate internationally, it also undermined national prosecutions. Bank and trust secrecy was also criticised as impeding investigations.

In addition, the lawyers say, while the FATF praised South Africa for developing a legislative structure to combat money laundering, the absence of a framework to combat the financing of terrorism was noted, whilst the framework in place was so new it needed time to be assessed for its effectiveness.

BakerPlatt notes that Jersey, which was not included on the white list, was assessed as 76 per cent compliant at the time of the island's last assessment by the International Monetary Fund in 2003. The most recent FATF assessments, issued in November last year, rated the Bahamas as 45 per cent compliant and Cayman as 78 per cent compliant.

However, five of the 13 countries on the list were far below this level, according to their most recent IMF assessments: Australia (24 per cent), Canada (14 per cent), Singapore (23 per cent), Switzerland (22 per cent) and the US (31 per cent).

"Australia's and Canada's staggering level of non-compliance with FATF recommendations makes it difficult for the EU to justify their inclusion on the white list on the grounds of 'equivalence'," Platt says.

"Given that the EU recently announced that it is to pursue infringement measures against 15 of its member states for failing to implement the Third Money Laundering Directive into national law, it would perhaps be better placed to give a jurisdiction such as Jersey the recognition it deserves, and the role model some of its member states appear to need, as the leader in the field of anti-money laundering."

Source: HedgeWeek

Argentine tax plan called money-laundering danger

An Argentine plan to boost tax revenue and stimulate the economy by enticing home offshore assets, with a no-questions-asked policy, is drawing fire from critics who say it could stimulate money laundering instead.

Argentine lawmakers began debating on Wednesday the bill sent by President Cristina Fernandez, one of a series of measures aimed at protecting the economy from the global slowdown by increasing investment and consumer spending.

With capital flight estimated at US$20 (NZ$37) billion this year and as much as US$140 billion in Argentine funds held offshore, the government wants to offer steep tax breaks to people and companies who declare their offshore investments.

The government has not said how much money it hopes to raise, but critics say the plan opens a can of worms because people who repatriate funds they parked offshore would be free of any investigation into the source of the money.

"The way it is worded the law is dangerous, at a time when drugs are advancing in this country, in terms of production, trafficking, consumption, financing of political campaigns and the presence of Mexican cartels," said political analyst Rosendo Fraga.

Argentina has largely been spared the drug violence of some Latin American countries, but in recent months sensational murders and arrests of alleged drug traffickers have shaken the country's sense of complacency.

Fraga also doubted the tax breaks would boost the economy since recent economic policies – such as a surprise nationalisation of the private pension fund system – have generated uncertainty about investing in Argentina.

Fernandez's ruling Peronist party and its allies have majorities in both the lower house and the Senate, but it was not clear whether the bill would get a smooth ride.

"Today Congress will vote on the worst amnesty law for corrupt people and money launderers," said opposition leader Elisa Carrio, of the Civic Coalition.

Argentina's basic tax rate on earnings is 35 percent, but the plan offers rates as low as 1 percent for assets that are repatriated and invested in industry, infrastructure or farming.

The same bill also sets out tax breaks for companies that put under-the-table workers on to the payroll. In addition, the government would drop prosecutions of individuals and companies who agree to long-term, low-rate plans to pay off back taxes.

Critics, including two former economy ministers under Fernandez and her husband and predecessor ex-President Nestor Kirchner, say those deals would punish those who followed the rules all along.

US Ambassador Earl Anthony Wayne initially said his country was watching the proposal closely, but this week he told reporters he was confident Argentina would continue to be a good partner in the battle against money laundering.

Argentina is a member of the International Financial Action Task Force, or FATF, an inter-governmental body that develops policies to combat money laundering and terrorist financing.

"Argentina's money-laundering law is in force and will continue in force. Argentina is not renouncing FATF norms or its commitments regarding money laundering and international terrorism," Cabinet Chief Sergio Massa said on Wednesday, in defense of the bill.

The Argentine economy grew by leaps and bounds over the last six years, but growth in tax revenue has slowed, as has industrial production.

The government has announced a US$21 billion public works programme and subsidized loans for car purchases, to preserve jobs in a tough global environment.

Source: STUFF

U.S. says Iran increasing activity in Latin America

Iran is increasing its activity in Latin America and the Caribbean, including actions aimed at supporting the Lebanese militant group Hezbollah, a top U.S. military commander said on Tuesday.

Navy Admiral James Stavridis, who oversees U.S. military interests in the region as head of U.S. Southern Command, also said Hezbollah was linked to drug-trafficking in Colombia.

"We have seen... an increase in a wide level of activity by the Iranian government in this region," Stavridis told the Senate Armed Services Committee.

"That is a concern principally because of the connections between the government of Iran, which is a state sponsor of terrorism, and Hezbollah," he said.

The U.S. State Department lists the Lebanese-based political and military movement as a terrorist organization.

Stavridis said Hezbollah activities in South America have been concentrated particularly in the border region between Brazil, Paraguay and Argentina, but also in Colombia.

"We have been seeing in Colombia a direct connection between Hezbollah activity and narco-trafficking activity," the commander added, without providing specifics.

Colombia said last October that it had smashed a drug and money-laundering ring suspected of shipping funds to Hezbollah.

Hezbollah has denied links to drugs and money-laundering and described allegations as part of a propaganda campaign aimed at harming its image.

President Barack Obama's administration has sought to move toward dialogue with Tehran, despite sharp differences on several topics including Iran's nuclear program. Iran says it only wants to generate power while the Washington and its allies accuse Tehran of trying to build a nuclear bomb.

Stavridis is the latest U.S. defense official to express concerns about Iranian influence in Latin America, where the left-wing governments in Venezuela, Cuba, Ecuador, Nicaragua and Bolivia have all become allies of Iran in recent years.

In January, Defense Secretary Robert Gates told the same Senate panel he was more worried about Iranian "meddling" than he was about Russia's activities in Latin America.

(Reporting by David Morgan, editing by Alan Elsner)

Source: Reuters

Organized Crime Embraces Film Piracy; Terrorists May Follow, Report Says

By Matthew Harwood

Film piracy by organized crime is flourishing worldwide, with some of the proceeds possibly financing terrorism, according to a new report from the RAND Corp. financed by the Motion Picture Association.

“If you buy pirated DVDs, there is a good chance that at least part of the money will go to organized crime and those proceeds fund more dangerous criminal activities, possibly terrorism,” said RAND’s Greg Treverton, the study’s lead author.

The criminal organizations that traffic pirated DVDs span the globe and often have multinational criminal connections. The report tells of one Italian crime boss turned government witness who explained the his organization's connection to Chinese and Taiwanese criminal gangs involved in film piracy and other acts of counterfeiting.

“Given the enormous profit margins, it’s no surprise that organized crime has moved into film piracy,” said Treverton.

The profits associated with film piracy are astounding, outperforming revenue generated from both Iranian heroin and Colombian cocaine. In Malaysia, a pirated DVD costs 70 cents to make and sells on a corner in London for $9, more than 1,000 percent markup.

The report also discusses three groups that have used film piracy to finance terrorism. The best-documented case involves the Irish Republican Army, which used film piracy among other criminal activities, to fund its terrorist campaign against the British government. Another case involves the D-Company, an Indian criminal group heavily involved in film piracy. In 1993, the group carried out a string of bombings on what became known as “Black Friday” in Mumbai, killing 257 people and wounding hundreds more.

The third example has the most relevance today.

In 2004, the U.S. government labeled DVD pirate and counterfeiter extraordinaire Assad Ahmad Barakat “a specially designated global terrorist” for transferring $3.5 million to Hezbollah. His criminal network operates within the heavily Lebanese tri-border area of Argentina, Brazil, Paraguay, in what RAND calls “most important center for financing Islamic terrorism outside the Middle East.” (For more on the connection between Islamic extremism, terrorist financing, and the tri-border region, see John Barham's "Hezbollah's Latin American Home," from the Feb. 2008 issue.)

RAND notes the boom in film piracy is directly linked to weak penalties when someone is caught and convicted, which is rare.

An individual convicted of selling counterfeit products in France can expect a maximum of two years in prison and a $190,000 fine compared to ten years in prison and a fine of $9.5 million if caught selling drugs. In the United States, 134 people were sentenced to federal prison for intellectual property crimes in 2002, while 1.5 million people were arrested for drug offenses nationwide in 2003.

If governments worldwide want to decrease the volume of counterfeited goods and cut off a possible avenue of terrorist financing, RAND recommends spending more money and manpower to address the problem while passing tougher penalties for those convicted of counterfeiting and other intellectual property crimes.

Source: Security Management

Alleged Hezbollah cell sold Canadian passport: FBI

The FBI has dismantled an alleged Hezbollah cell accused of arms dealing, depositing counterfeit money in a Canadian bank and selling a Canadian passport to support the Lebanese terrorist group.

Ten people from New York, New Jersey, Lebanon and Venezuela have been indicted and face up to 30 years in prison following an investigation that began in 2006, the U.S. Department of Justice announced on Tuesday.

The indictments link Hezbollah to a wide array of crimes, ranging from counterfeiting U.S. currency and money laundering to fencing stolen cars, cellular phones, laptops and Sony PlayStation 2 systems.

The case also implicates Iran and Syria in Hezbollah's illicit arms network. The suspects allegedly tried to ship guns to Latakia, a Syrian port they said was controlled by Hezbollah. And Hezbollah officials in Iran were allegedly involved in the weapons purchase.

During the investigation, one of the suspected ringleaders told an undercover agent that "Hezbollah receives a great deal of money from Iran" and "maintains small cells throughout the world." He cited the bombing of a Jewish centre in Argentina as an example.

"The allegations contained in this complaint demonstrate how terrorist organizations rely on a variety of underlying activities to fund and arm themselves," said David Kriss, the Assistant U.S. Attorney.

The group allegedly attempted to ship 1,200 Colt M-4 machine guns through Syria to Hezbollah. To raise money, it sold passports for $10,000, including a genuine Canadian passport into which a false page had been inserted.

A suspected ringleader of the group, Dib Hani Harb, is the son-in-law of Hassan Hodroj, a member of the Hezbollah Political Council. Hezbollah leader Hassan Nasrallah attended Mr. Harb's wedding.

Mr. Harb allegedly showed counterfeit U.S. currency to a witness, and said it had been manufactured in Iran. He said he had deposited $10,000 worth of the phony bills into a Canadian bank account.

Hezbollah is a militant Islamist group that is backed, trained and financed by Iran. It is a banned terrorist group under Canadian law. The Canadian government's official profile of Hezbollah accuses it of car bombings, hijackings and kidnappings in Western Europe, South America and Israel.

In a speech last month, RCMP Commissioner William Elliott warned that Hezbollah violence could spread to Canada. "While Hezbollah has not articulated any specific grievance with Canada, from its perspective any state that supports Israel or Israeli interests is the enemy, which casts a wide net," he said.

Charged are: Mr. Harb, Mr. Hodroj, Hasan Antar Karaki, Moussa Ali Hamdan, Hassan El-Najjar, Moustafa Habib Kassem, Latif Kamel Hazime, Alaa Allia Ahmed Mohamed, Maodo Kane and Michael Katz.

Source: National Post

sbell@nationalpost.com

Tri-border transfers 'funding terror'

The tri-border area, where Paraguay, Brazil and Argentina meet, is a lawless region where drugs trafficking, gun running and counterfeit goods are rife.

The BBC has now found documents showing the suspicious transfer of large sums of money to the Middle East, which investigators believe goes to fund terrorism. The BBC's Andrew Bomford reports from Ciudad del Este in Paraguay.

It didn't look like the global centre of a business sending billions of dollars overseas, but on the first floor of the dingy-looking shopping arcade, if you could get past the two guards blocking the stairs, there it was - a shop, looking like a pawnbrokers, called Telefax.

According to Paraguayan and American investigators, Telefax, owned by a Lebanese businessman called Kassem Hijazi, is responsible for transferring huge sums of laundered money overseas and hiding the identities of the people responsible.

The money is believed to be the proceeds of crime - anything from drug smuggling, to gun running, to counterfeit goods to tax evasion.

"From the evidence and documentation we saw, it was clear that this man was moving large sums, hundreds of millions of dollars, through its doors, in its own name, hiding the identities of who was truly the owners of the money," said Carlos Maza, of the US Department of Homeland Security.

"Kassem Hijazi is a serious player who more than anything else has found the vulnerability in the Paraguayan system, the ability to control how money is moved through its banking system."

'Frustrating situation'

But US investigators are particularly worried that some of this money goes to fund terrorism as well as militant organisations like Hezbollah and Hamas.

Robert Morgenthau, the New York District Attorney, has prosecuted a number of American banks for moving millions of dollars from the tri-border area to what he suspects are terrorist bank accounts in the Middle East.
"We've found money going to the Arab Bank in Ramallah," he told the BBC.

"The Arab Bank is well known as one of the banks used by terrorist organisations. But that's part of the frustration. You don't know who's sending the money and you don't know who's receiving it."

The BBC saw company accounts for Telefax showing a business with an annual turnover of just $50,000.

But a large number of money transfer documents, obtained in a series of raids by Paraguayan prosecutors, show Telefax making international transfers worth ten times that amount almost on a daily basis.

Claims denied

The owner of Telefax, Kassem Hijazi, agreed to do an interview with the BBC.

He produced a large amount of the prosecution paperwork allegedly showing thousands of money transfers, but claimed that every single one of the documents had been forged.

"The proof is here," Mr Hijazi said, indicating the transfer documents.

"They have to prove that I've done it. Even the prosecutor says the documents are false, not us, the prosecutor. I wasn't transferring money abroad. It's the money exchange houses that send the money, and they've forged the documents. We don't do transfers abroad."

Mr Hijazi did admit to using numbers instead of names for his clients, effectively hiding their identities, but he said that was merely to make his paperwork easier.

The BBC examined a number of the transfer documents and saw large amounts of money, around $10m, moving to Lebanon in the space of a year.

Three transfers, for $100,000, $70,000, and $42,200, went in the space of two days to companies in Beirut which did not appear to exist.

Adolfo Marin, the original prosecutor in the case, said it was very difficult to investigate the money transfers because the banks in Beirut were dominated by Hezbollah.

"I have no idea what they can export to us from Lebanon, so necessarily the money that goes to Lebanon is not for imports," he said. "So it is possible to formulate a hypothesis about the probability of money laundering and links with terrorism."

Kassem Hijazi strongly denied any involvement in terrorist financing. "It's absurd," he said.

"It doesn't happen here. The people I work with are friends, not terrorists. They've been investigated and if there was some evidence they would have been charged."

'Helping our brothers'

This view was supported by Sheik Taleb Jomha, the Muslim leader of the 30,000-strong Lebanese community in the tri-border area.

"I am not telling you a secret when I say that Iran and Syria are supporting Hezbollah," he said.

"Iran has the ability to send weapons and rockets, not us. They say money is moving from here to the Middle East. That's right. But not to help political or military groups, but to help our brothers and sisters who need help."

Kassem Hijazi is not facing charges of money laundering or even terrorist financing.

In Paraguay, funding terrorism is not a crime, and the law on money laundering is out of date, making it difficult to achieve a prosecution.

A new law has been languishing, unapproved, in the country's Congress for more than two years.

In the meantime, Mr Hijazi has been accused of tax evasion, which he also denies, and is expected to face trial in 2007.

http://news.bbc.co.uk/2/hi/americas/6179085.stm

U.S. targets Hezbollah finance network

By Jeannine Aversa
The Associated Press
Article Last Updated:12/07/2006 12:11:53 AM MST


Washington - The Bush administration took action Wednesday aimed at choking off a major fundraising channel for Hezbollah operating in the tri-border area of Argentina, Brazil and Paraguay.

The Treasury Department's action covers nine people and two entities - a shopping center in Paraguay and an electronics company, Casa Hamze, located in the shopping center.

As a result, Americans are forbidden from doing business with them, and any bank accounts or other financial assets belonging to the designated people and entities found in the United States must be frozen.

In a joint statement, Argentina, Brazil and Paraguay said that "the information presented by the United States does not provide any new elements that would permit it to affirm the existence of terrorist activities in the region, including the financing of terrorism."

The statement added that "no operative terrorist activities were detected in the Triple Border region."

The department alleges that those designated have provided financial and logistical support to the Islamic militant group Hezbollah, which the United States considers a terrorist organization. The Lebanon-based Hezbollah is suspected of involvement in terrorist attacks worldwide.

The U.S. also blames Hezbollah for triggering bloodshed in the Middle East involving Lebanon, Israel and the terrorist group during the summer and more recently stirring political unrest in Lebanon.

Specifically, the department alleges that the designated people gave financial and other assistance to Assad Ahmad Barakat, whom the government several years ago added to its asset-blocking list for his support of Hezbollah.

"Assad Ahmad Barakat's network in the tri-border area is a major financial artery to Hezbollah in Lebanon," said Adam Szubin, director of the Treasury Department's Office of Foreign Assets Control.

The Treasury Department alleged that Muhammad Yusif Abdallah is a senior Hezbollah leader in the tri-border area and an important financial backer of the terror group.

It says Abdallah is an owner and manager of the Galeria Page shopping center located in Paraguay, which the department also designated on Wednesday.

The department alleged that Abdallah pays a percentage of his income to Hezbollah based on the profits he receives from the shopping center. It alleges that Abdallah has been involved in importing contraband electronics, falsifying passports, credit-card fraud and trafficking counterfeit U.S. dollars.

Hamzi Ahmad Barakat also was designated, with the government alleging that he is a Hezbollah member in the tri-border area and has served as a source of funding for the terror group through his electronics store, Casa Hamze. He also is suspected of trafficking in narcotics, counterfeit U.S. dollars, arms and explosives, the government said.

Hatim Ahmad Barakat, who has traveled to Chile to collect money for Hezbollah and is the brother of Assad Ahmad Barakat, also was named.

The tri-border region is considered a haven for arms traffickers, smugglers and counterfeiters and is home is thousands of Lebanese Muslims. It was once described by the U.S. State Department as a "focal point for Islamic extremism in Latin America."

http://www.denverpost.com/headlines/ci_4792568

Brazil rejects U.S. action against alleged terrorist links in tri-border area

The Associated Press
Friday, December 8, 2006
RIO DE JANEIRO, Brazil

Brazil has rejected U.S. sanctions against alleged terrorist fundraisers in the tri-border area with Argentina and Paraguay, saying American officials failed to present sufficient evidence.

The Foreign Ministry announcement late Thursday indicated that the three South American governments are unwilling to place complete trust in U.S. assertions about the war on terror.

The administration of U.S. President George W. Bush on Wednesday imposed sanctions on what it termed a major fundraising channel for the Islamic militant group Hezbollah in the tri-border area, focusing on nine people plus a shopping center in Paraguay and an electronics company located there.

The U.S. Treasury Department barred Americans from doing business with them and said any bank accounts or other financial assets belonging to the nine people and the businesses found in the United States must be frozen.

But Brazil said the three countries met in Buenos Aires this week and decided there was not "any new data or evidence that corroborates the accusation by the United States."

It also said the United States had failed to prove oft-repeated suggestions that the region itself is a hotbed of terrorist financing.

"In light of the information available, there is no sign of the occurrence in that region of activities linked to terrorism or their financing," the Foreign Ministry statement said. "That position is shared by Argentina and Paraguay."

The ministry said that "unilateral statements that arbitrarily single out the tri-border region cause undue harm to the region," but it reiterated Brazil's "international commitment ... for the prevention and combat of terrorism."

The tri-border region is considered a haven for arms traffickers, smugglers and counterfeiters and is home is thousands of Lebanese Muslims. The United States considers the Lebanon-based Hezbollah a terrorist organization and the group is suspected of involvement in terrorist attacks worldwide.

At least some local analysts praised Brazil's action.

"It's a question of national sovereignty," said Alexandre Barros, a political analyst with the Early Warning consulting firm in Brasilia. "The United States says it's all rotten here, but Brazil has no international obligations unless they are proven and discussed. They say, 'We're going to clamp down,' but that's unacceptable. Brazil doesn't have to accept"

Barros said Brazil had been cooperative in opposing international terrorism, "but the problem has to be concrete."

The U.S. alleges that it had identified people who had given financial and other assistance to Assad Ahmad Barakat, whose "network in the tri-border area is a major financial artery to Hezbollah in Lebanon," said Adam Szubin, director of the Treasury Department's Office of Foreign Assets Control.

The Treasury Department alleged that Muhammad Yusif Abdallah, allegedly an owner of the Galeria Page shopping center in Paraguay, is a senior Hezbollah leader who pays a percentage of his income to the group.

It also said that Hamzi Ahmad Barakat funded Hezbollah through his electronics store, Casa Hamze, located in the shopping center.

The U.S. government said regional law enforcement authorities have been concerned about their activities and the U.S. move should come as no surprise.

"The U.S. government stands firmly behind our designation of these nine individuals as terrorist financiers for Hezbollah," Molly Millerwise, the department's public affairs director, said in an e-mail on Friday to The Associated Press.

"It is important for countries around the world to recognize that their obligation to fight terrorism extends beyond simply preventing attacks within their own borders and includes halting the export of funds that facilitate terrorism elsewhere," she said.

http://www.iht.com/articles/ap/2006/12/08/america/LA_GEN_Brazil_U.S._Terror.php

Argentina, Brazil, Paraguay deny terrorism at shared border

The governments of Argentina, Brazil and Paraguay on Thursday rejected accusation made by a U.S. report that the so-called "triple frontier" where the three nations meet is a haven for terrorists.

The joint statement said that the U.S. document had presented no new evidence for their repeated claim that terrorism and terrorist financing operated in the region.

The statement was issued at the end of the three-day fifth Plenary Meeting of the 3+1 Mechanism on Triple Frontier Security held in Buenos Aires.

The final statement was a reply to the United States, which was an observer at the meeting and has recently published a report saying that the "triple frontier" is home to a network charged with collecting funds and staff for Lebanon's Hezbollah guerilla.

The U.S. authorities on Wednesday froze the U.S. assets of nine people and two businesses in the border area, accusing them of transferring millions of dollars to Hezbollah, which engaged in a fierce fighting with Israel this summer. Washington labeled the organization as a terrorist group.

Source: Xinhua

http://english.people.com.cn/200612/08/eng20061208_330089.html

US freezes funds to Hizbollah

Friday December 8, 2006


WASHINGTON - The United States froze the US assets of nine people and two businesses in the border area of Brazil, Argentina and Paraguay who Washington said helped funnel millions of dollars to Hizbollah.

The US Government considers the Shiite Muslim militia a terrorist organisation.

The Treasury said the people and businesses raised and transferred cash for Hizbollah through the triple border area between the South American countries, which is home to a large Arab community.

An executive order froze their US assets and banned transactions with US citizens and banks.

"Millions of dollars have been raised and moved by this network," Treasury assistant secretary for terrorist financing Pat O'Brien said. "One of the key ways money has moved is through personal couriers."

- REUTERS

http://www.nzherald.co.nz/category/story.cfm?c_id=340&objectid=10414395