Hezbollah, Congolese Timber, and Illegal Fish – Trade-Based Money Laundering in 2017
Wednesday, June 14, 2017
Posted by: Brian Monroe
*Special contributor report*
By Jason Shechter
Risk Management Advisor for SightSpan, Inc.
June 14, 2017
Originally published here. Republished with kind permission of SightSpan.
In February, international NGO Global Witness published a lengthy report detailing how US companies and consumers may be unwittingly funding terror through purchases of imported wood products.
Global Witness, an organization focused on environmental and human rights issues, released “Unsanctioned Trade,” a report which details the ways in which the Lebanese Shiite terrorist organization Hezbollah ultimately profits from the sale of timber from the Democratic Republic of Congo (DRC).
The report centers around the logging company Cotrefor and its owners, the Tajideen family. The Tajideens are Lebanese businessmen with several operations in the DRC and nearby countries. They are also believed to be supporters of Hezbollah.
In 2009, the US Treasury announced Sanctions against Kassim Tajideen and an associate. At the time, Kassim Tajideen was based in Sierra Leone and was implicated in fraud, money laundering, and diamond smuggling schemes, as well as providing funds to Hezbollah.
But in a 2016 interview with the Guardian, Kassim Tajideen denied that he had raised “tens of millions of dollars” for the organization and stated that he had never been convicted for laundering money. However, he and his wife were fined by the Belgian Government for “financial irregularities.”
He has remained on OFACs list of sanctioned individuals, and in March, was arrested in Morocco and extradited to the US.
Family empire built on shipping, grocery chains
The Tajideen family’s empire includes shipping companies and supermarkets in several West African nations. One example is Tajco, a grocery chain in Gambia which was sanctioned by OFAC in 2010, along with several other Tajideen-owned companies, for providing support to Hezbollah.
The report issued by Global Witness focuses primarily on Cotrefor (formerly known as Trans-M), a logging company connected to Tajideen-owned conglomerate Congo Futur. Congo Futur is owned by Ahmed Tajideen, Kassim’s brother, who also appears on OFAC’s sanctions list.
Cotrefor has been granted concessions to harvest timber in the DRC’s diminishing forests. These operations have been criticized by several groups, including Greenpeace, for violating environmental regulations and creating unsafe conditions for workers.
However, what is most disturbing about the Global Witness report is the fact that this timber has most likely made its way to the US and EU.
Questionable timber is harvested by Cotrefor and then sold on to other companies to be processed. Global Witness reports that some purchasers are failing to conduct due diligence to ensure that the timber is legal and that such transactions do not violate sanctions.
Others are simply skirting the rules for their own gain, aware that they are violating the law in doing so. Some traders are knowingly circumventing sanctions and the wood in question is entering the market in the form of furniture and other products.
It is unlikely that consumers are aware that they have unintentionally helped to provide funding to a dangerous terrorist organization.
The report is fascinating and goes into detail to tell the story of just how the Tajideens have built such a commanding presence in the DRC. But dealing in questionable commodities is just one way that terrorist organizations seek to make their money. Another is trade-based money laundering (TBML).
Money laundering through international trade
The Financial Action Task Force (FATF) defines trade-based money laundering as “the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimize their illicit origins.”
More simply, it involves methods for moving funds through the exchange of goods. This can include over or under invoicing, which allows an entity to buy or sell items at extremely high or low prices.
For example, a criminal organization can purchase jackets that should cost $20 a piece from a seller who is on the other end of the scheme. The jackets are sold for thousands of dollars instead.
When this occurs, illicitly procured funds can easily be hidden as supposedly legitimate business expenses or profits. The process often involves the use of shell companies based in tax havens which can generate the paperwork needed to make it seem as if nothing suspicious is taking place.
Another example of (TBML) includes a case documented by FATF in which a drug cartel sought to bring dollars back to Colombia.
It did so using a broker who could convert the dollars to pesos for a fee. The broker then made a payment in dollars for items to be exported, and was repaid in pesos by a Colombian importer, thereby appearing to make a legitimate trade and positioning himself to make future transactions.
Mexican cartels have also created schemes in which goods are shipped from Mexico to the US in seemingly legal transactions, but which really allow for illicit profits to flow back to Mexico.
In many cases, counterfeit items can be sold in place of the real thing. Counterfeit items can then be sold at a tremendous profit allowing criminal organizations to move substantial amounts of money.
Something fishy as anglers angle for big catches
A startling example of this is fish laundering. Deutsche Welle reports that 1 in 5 fish sold for consumption is obtained illegally, either by fishing in areas that should be off limits, or by outright poaching of species that may be endangered.
Fish, as well as other food items, are often not what consumers believe them to be.
In some cases, fishing operations will exchange fish at sea with no legal oversight, thereby circumventing any regulatory authority. Money is exchanged without any agencies or watchdogs being able to detect if the source of the funds is legitimate within the confines of the law.
The exact dollar amount lost to this form of money laundering is unknown, though estimates vary. A 2014 article from the Economist puts the number in the hundreds of billions, though some estimates put it higher.
As governments and agencies across the globe have tightened and improved their ability to stop more traditional forms of money laundering, (TBML) remains an ongoing problem.
Talk of border security in the US has focused partially on keeping drugs out, though Immigration and Customs Enforcement have also targeted the money leaving for Mexico. Hundreds of millions of dollars in cash have been prevented from exiting the US at various border crossings, but the problem of diminishing the value of drugs sold here is more challenging.
Thankfully, there are ways to detect and prevent trade-based money laundering.
These include accurate documentation of goods sent and received, knowledge of where products are sourced or shipped within the supply chain, and following best practices with regards to who you are doing business with.
Paying attention to where goods are coming from or going, as to avoid being exposed to excessive risk can help to mitigate this problem. Essentially, many of the methods used to address more traditional forms of money laundering can be applied to prevent TBML.
These methodologies might well be employed to prevent American consumers from unwittingly handing money over to terror groups.