The Tri-Border Area (TBA) along the junction of Argentina, Brazil, and Paraguay is a hotbed of illegal activity that includes money launderers, arms traffickers, counterfeiters, drug traffickers, and terrorists. In fact, it is one of the most dangerous places in the world. According to a recent U.S. Government study, this area annually generates over $6 billion of illicit money and is nearly devoid of all governmental control.
Given the combination of a porous border and known terrorist activity, the TBA has quietly become a top priority for U.S. policymakers since the September 11 attacks. According to former FBI director Louis Freeh, the area isa “free zone for significant criminal activity, including people who are organized to commit acts of terrorism.” Numerous U.S. intelligence and law enforcement agencies believe that many of the area’s approximately 20,000 Muslim and Arab residents give financial support to groups such as Hizballah, Hamas, Egyptian Islamic Jihad, and al-Qaeda. South American and U.S. officials have concluded that money raised in the TBA is used to finance training camps, propaganda operations, and bomb attacks in South America.
Yet all three TBA governments generally deny the problem, claiming that they have not detected terrorist activity or cells in the region. Counterterrorism officials from other countries disagree, with the U.S. and Israel reportedly going so far as to dispatch CIA and Mossad operatives to the region to neutralize what they believe could be an imminent terrorist threat.
Hizballah is perhaps the most active terrorist group in the TBA, and its role there has been extensively documented. For example, a U.S. congressional report stated that the group “clearly derives a quite substantial amount of income from its various illicit activities in the TBA.” The organization reportedly used the TBA to plan and finance two major terrorist attacks in Buenos Aires, the 1992 attack on the Israeli embassy and the 1994 attack on the city’s main Jewish community center.
Twice in recent years, the U.S. Treasury Department has taken action against Hizballah in the TBA. In 2006, Adam Szubin, Director of the U.S. Office of Foreign Assets Control (OFAC) charged that Assad Ahmad Barakat was a “major financial artery to Hizballah in Lebanon.” That same year, the Treasury Department designated nine individuals and two businesses in the region for providing financial and logistical support to Hizballah.
What can the three TBA countries and the international community do to reduce illicit activity in the TBA? First, while Brazil and Argentina, after tremendous international pressure, have criminalized financing of terrorism, Paraguay has yet to do so. This represents a significant challenge to counter-terrorism and anti-money-laundering efforts, and the Argentinean government and its allies should stress how important it is for Paraguay to implement this type of reform.
The financial industry should also be marshaled into action. Banks in Brazil, Argentina, and Paraguay, in addition to major financial institutions around the world, should carry out enhanced due diligence on all transactions emanating from the TBA. These countries should also force their banks to implement strict controls to prevent abuse of the financial industry. A significant number of financial institutions operate in the zone, and most are complicit to some degree in the illicit activity. For example, Ciudad del Este, in the Paraguayan part of the TBA, reportedly has 55 different banks and foreign exchange houses, despite a population of only 300,000. Since other cities of similar size average 5-10 banking facilities, this appears to indicate that many of those institutions are involved in illicit activity.
The three TBA countries may wish to emulate a successful U.S. law enforcement model known as High Intensity Financial Crime Areas (HIFCAs) and High Intensity Drug Trafficking Areas (HIDTAs). These “areas” were conceived as a means of concentrating law enforcement efforts—investigations, analysis, and prosecution—in regions with significant illicit activity. The creation of such zones has historically proven effective in curbing illicit activity. The U.S. government should offer massive foreign aid to encourage TBA governments to undertake this initiative.
Brazil, Argentina, and Paraguay can do much more to confront the threat of illicit financial activity. Implementation of measures to detect and prevent such activity, coupled with a robust ability to enforce financial controls, is vital if the international community is to make serious headway against money laundering and terrorism financing.