Drugs, diamonds and used cars: the Hezbollah network the US destroyed

With leaders under fresh sanctions, a 2010 investigation shows how the group's finances can be hit

FILE - In this Friday, April 13, 2018 file photo, Hezbollah leader Sayyed Hassan Nasrallah delivers a broadcast speech through a giant screen during an election campaign in a southern suburb of Beirut, Lebanon. Campaigning for the first election in nine years has revolved around promises of stability and growth and has avoided divisive issues such as Hezbollah's weapons and its regional alliances, virtually guaranteeing the Iran-backed militant group's continued domestic hegemony. (AP Photo/Hussein Malla, File)

The GCC and the US have Hezbollah's senior leadership firmly in their crosshairs with new sanctions against the Lebanese group's top officials.

“By targeting Hezbollah’s Shura Council, our nations collectively rejected the false distinction between a so-called ‘political wing’ and Hezbollah’s global terrorist plotting,” US Treasury Secretary Steven Mnuchin said on Wednesday.

The sanctions target leader Hassan Nasrallah, his deputy Naim Qassem and four other leaders. The US Treasury had previously sanctioned Mr Nasrallah for disrupting the Middle East peace process in 1995 and again in 2012 over its involvement in Syria.

Past investigations into Hezbollah financing have had far-reaching consequences.

In the case of the now-defunct Lebanese Canadian Bank, what was once one of Beirut’s major financial institutions folded and later forfeited $102 million (Dh375m) in assets after it was blacklisted by US authorities for its part in what the US said was a vast Hezbollah money-laundering network.

The investigation offered a rare glimpse into a secretive network linking Colombian cocaine cartels, West African conflict diamonds and North American used car lots through which Hezbollah-linked Lebanese businessmen worked around sanctions to bring assets from underworld sources into legitimate global financial systems.

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In the past Hezbollah was believed to have received up to $200m annually from Iran, but that amount diminished as Iran’s economy struggled under sanctions aimed at its nuclear programme. The militant group – which also maintains expensive social services – needed to diversify its funding sources.

A 2010 US Drug Enforcement Administration investigation found that account holders at the Lebanese Canadian Bank were receiving the profits from smuggling South American cocaine to Europe. Expatriate Lebanese businessmen were then channeling those profits into other businesses, including buying used cars in North America to sell in West Africa and the purchase of rough diamonds.

After another Lebanese bank, Societe Generale de Banque au Liban, agreed to buy Lebanese Canadian’s assets in 2011, an audit uncovered nearly 200 accounts involved in the money-laundering scheme, at the centre of which was Hezbollah.

In August 2012, the US government seized $150m of the Lebanese Canadian Bank’s assets, with the bank later agreeing to a $102m settlement. While the case put businesses on notice that they dealt with Hezbollah at their own risk, some have questioned the efficacy of sanctions.

While there has been no official reaction by Hezbollah or Iran, an editorial by the the pro-Hezbollah Al Akhbar newspaper on Thursday argued the new sanctions were a politically motivated response to Hezbollah's strong showing in the recent Lebanese parliamentary elections.

“The sanctions imposed on the Hezbollah leadership will not affect their lives or their work for the party operates outside the Lebanese and international banking system,” it said. “Therefore, the effect of these sanctions is political and nothing more and the target is not Hezbollah, but its partners in the next government.”

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