Black Market Billions: How Organized Retail Crime Funds Global Terrorists (Gal Zentner's Library) (5 page)

MS-13 quickly became globally ranked for criminal activity, along with drug trafficking organizations (DTOs) and Mexican Zetas, according to Samuel Logan, author of
This Is for the Mara Salvatrucha: Inside the MS-13, America’s Most Violent Gang
. Despite being from various parts of Central and South America, these gangs have one thing in common. Their strong paramilitary backgrounds allow them to structure themselves into “cliques”, individual groups that can number in the hundreds, which operate together within a common network to wage violence with militaristic fervor. Their structures are elaborate, flexible, and sustainable, with solid leadership at the helm and another person to back it up. They function as networks with extensive transnational linkages. Their internal functions are broken into groups and include recruiting, logistics, battle, intelligence (gathering and propaganda), and juvenile delinquents. These are the ones engaging in ORC, in addition to extortion, selling drugs, and committing homicide for pay.
³⁹

Similar to how non-Afghan mujahideen soldiers eventually formed Al-Qaeda, the Zetas originated from ex-Mexican Special Forces operatives. Not only were these soldiers trained in the art of psychological warfare, but they also were trained to kill like combat forces. “These special forces soldiers just got too close to the money and defected,” says Logan. “They are the most sophisticated and well run as far as organized crime rings go. Leaps and bounds over Pablo Escobar (a late Colombian drug lord once know as “the world’s greatest outlaw” and certainly the richest). And because of their level of sophistication, they were able to take on the Mexican government head on.” Members of these organizations are also known to be heavily armed, with weapons including M-16s, AK-47s, and grenades.
⁴⁰

But weapons cost money, and so does running a 69,000-member organization.

To have consistent cash flow to pay for hotel rooms, cars, transportation, and overhead costs, the MS-13 raised funds by escorting people across the U.S. border for thousands of dollars per person. If they are crossing through Mexico, they work with Mexican organized crime rings such as the Zetas or the Tijuana, Juarez, or Gulf drug cartels. The organizations and cartels monitor who the MS-13 traffics
in because they take an increased percentage per head depending on whether those crossing are Chinese, Central Americans, or Mexicans. To bring an Arab into the U.S., the “tax” and percentage per person is much higher.
⁴¹

“It is possible that the MS-13 is working with Hezbollah as well as the al Qaeda to smuggle [operatives] into this country. The question is to what extent they are involved and if Hezbollah or al Qaeda really requires their help,” says Logan. “There are some Latinos who are becoming Islamic radicals and are engaged in activities that support the Hezbollah. Because of the MS-13’s strong ties to Latin and Central America, and because their organization is so vast, adaptable, flexible, and connected, the U.S. government would have a hard enough time going up against them. Forget about the Mexican government. It makes sense that the [MS-13s] would be the main facilitators of illegal entry into the United States.”
⁴²
Logan points out that in illegal border crossings, rarely do people give their correct names, nor are they asked what their real names are. “Based on what is happening in Latin America, in countries where the Hezbollah have a strong presence as well as the MS-13, you can’t assume they’re not working together.”
⁴³

In addition to making money from smuggling people into the U.S., some of whom could be sympathetic to terrorist organizations, many members of the MS-13 are members of or have created organized crime rings (OCRs). This helps them generate income for paying off drug cartel border taxes in their country of origin. They also use the money to help support their families back where they came from. Members who are based in port cities, such as Los Angeles, Miami, New York, Chicago, and Houston, operate rings that fence everything from baby formula to pirated DVDs and cigarettes.

“I wouldn’t be surprised if it [organized retail crime] makes up 5% to 6% of what they earn,” says Logan. “Half of their extortion, one quarter of the proceeds, comes from being hired hit men; the other 20% or so of the income pie is derived from between five or six things, like drug sales and shady business deals. But ORC is definitely
a significant portion of their income because it’s a lucrative business. They will steal several quarts of baby formula, cut it with generic powdered milk like they would a powdered drug, and repackage it so that they get more quantity. If you steal a kilo, you can make pretty good money with it.”
⁴⁴

Members of the MS-13 are obliged to support other members’ families, wives, girlfriends, and children if those fellow members are in prison. Logan estimates that almost 60% of the MS-13 funds made through ORC is sent back to El Salvador or other countries via underground banking systems. There is very little accountability, so it’s hard to determine exactly how much is sent back per month. However, Logan estimates that thousands of dollars per week per clique could be sent back, with payouts to families in amounts that range from $500 to $800 a week, so that they are taken care of and don’t get turned out on the street. In addition, funds are used to pay off corrupt judges within their countries of origin. Logan notes that 20 MS-13 members were essentially let out of jail because their sentences were paid off by other members of the organization. What’s more, judgments are made based on what facts a judge writes in a statement. Bribes are often paid to change the facts or sway the judge in favor of the person on trial. Logan recalls one judge getting paid nearly $30,000 to let a single MS-13 member go free.

Access to Funding Gets Creative

Avoiding banking systems is the modus operandi of most homegrown terrorists. For example, Faisal Shahzad worked with four other men in Pakistan as well as the U.S. to move money to and from Pakistan to fund his failed Times Square terrorist plot in May 2010.

According to a report on terrorist financing by the U.S. General Accounting Office, the use of informal banking systems is one of the ways in which organizations earn, move, and store assets. Like other
criminals, terrorists focus on crimes of opportunity in vulnerable locations and seek to operate in relative obscurity by taking advantage of close networks of people.
⁴⁵
The Financial Action Task Force (FATF) requires all member countries to ensure that individuals and entities providing money transmission services must be licensed and registered and subjected to the international standards set out by the FATF.
⁴⁶
But as seen in the case of Shahzad, countries, including the U.S., have a difficult time regulating money transfers.

Terrorist organizations have to stay two steps ahead of law enforcement even when it comes to the transferring of money. Federal law may cover bulk cash transfers over borders, “just like Tony Montana did in
Scarface
,”
⁴⁷
says John Tobon, Unit Chief of Financial Programs of the Cornerstone Unit of Immigration and Customs Enforcement. These perpetrators are prosecuted in a federal court if they are caught. Laws do not take into account just how technologically advanced money transfers are becoming and that they are evolving rapidly. The use of stored value cards, PayPal, and wire transfers in conjunction with hawalas allows potential terrorists to move money quickly and remain undetected. When there is more than $10,000 on a stored value card in someone’s wallet, customs enforcement doesn’t know about it.

In an interview with me in July 2010, Tobon explained how his unit tracks 20 different initiatives by looking at the utilization of shell corporations. These corporations are fronts, acting as legitimate businesses so that terrorist cells can transfer laundered money more readily and easily. Tobon spends his time investigating wire transfers, Ponzi schemes, and ATM fraud—the real issue he says is the generation gap between law enforcement and the criminals.

“We are dealing with a group of people where the virtual world is the only world they know,” says Tobon. “Law enforcement is full of 37-year-old guys, all of whom didn’t grow up with the Internet and are at times slow adapters. This is where we see the generational gap widen. In a recent financial fraud case, a loose confederation of very bright and young men all under 25 got together every six to eight
months to defraud customers via stealing their identities and credit card numbers online. The shocking part was that they were making $20 to $25 million a year just on their ability to manipulate web sites. We are going to see that more and more, especially within terrorist cells and networks. In order to arrest them, we have to know them, and the only way we are going to do that is to technologically evolve.”

Burrowing In: The Hezbollah Finds a Home in the U.S. and South America

As terrorist organizations such as al Qaeda, Hezbollah, and Hamas began to disassemble, cells of the organizations started to crop up in unlikely areas of the world. The Tri-Border Area in South America (the border intersection of Argentina, Brazil, and Paraguay) piqued the interest of the FBI and ICE in 2002 when word got out that terrorist operatives were meeting in the area. Meetings took place in and around Cuidad del Este that were attended by representatives of the Hezbollah and other groups sympathetic to Osama bin Laden’s terrorist network.
⁴⁸
Capitalizing on the frustrations of about 25,000 Arab and Lebanese residents living in the area, the Hezbollah set up shop in the South American region. It used the millions of dollars it raised via counterfeit and stolen product smuggling schemes to fund terrorist training camps, propaganda operations, and bomb attacks in South America.
⁴⁹

With porous, ill-patrolled borders within the region, U.S. officials fear the rate of potential terrorists entering the U.S. via Brazil or Mexico is extremely high.

Cars, motorcycles, and people can slip between countries’ borders without documents being checked. According to the CIA, the Hezbollah militiamen are less likely to raise suspicions because they have Latin American passports, speak Spanish, and look like Hispanic tourists.
⁵⁰
In addition, many of the alien smuggling networks that move non-Mexican aliens over the borders have ties to Muslim communities in Mexico. According to a 2004 paper on terrorism threats
from the CIA’s Counterterrorism Center, “Non-Mexicans often are more difficult to intercept because they typically pay high-end smugglers a large sum of money to efficiently assist them across the border, rather than haphazardly traverse it on their own.”
⁵¹

Even more significant than members of terrorist organizations getting smuggled into the U.S. is how they are getting the money to pay for it.

Supporting the Enemy Through Charitable Donations

Muslims are required to give away 2.5% of their earnings as a form of
zakat
, or alms. Hezbollah, al Qaeda, and al Shabaab sympathizers concur wholeheartedly with this sentiment. Since zakat guidance is broad, alms can be given to whomever or whatever organization donors see as worthy. For example, when a
fatwa
52
was issued by the late Ayatollah Khomeini, it legitimized the use of zakat funds to finance the resistance movement against Israel.
⁵³

This gesture is more for charitable giving and supporting those in need. However, the lines get blurred when it comes to Hezbollah, al Qaeda, and al Shabaab sympathizers who willingly give zakat to fund terrorist acts and shroud this as a religious duty. In testimony given by Dr. Matthew Levitt, senior fellow and director of terrorism studies at the Washington Institute for Near East Studies, Hezbollah receives significant financial support from Hezbollah sympathizers living abroad, especially from Lebanese nationals living in Africa, South America, and other places with large Lebanese Shia expatriate communities. Hezbollah’s main income, according to Hezbollah Parliamentarian Mohammad Raad, comes from the group’s own investment portfolios and wealthy Shias.
⁵⁴

From America to South America: Ties Get Stronger in the Tri-Border Region

South America’s Tri-Border Area has been a lucrative region for Hezbollah. Because of its dense population, designated free-trade
area, access to ports (Puerto Iguazu, Argentina), hidden air strips, and minimal law enforcement presence, smuggling merchandise is a significant way in which sympathizers raise funds. And it’s taking place within U.S. borders.

The connection to the Tri-Border Area has deep roots in the U.S. Within a couple months of each other, two men were arrested in connection with providing material support to the Hezbollah in the Tri-Border Area in the form of smuggled and stolen merchandise. Moussa Ali Hamdan, a 38-year-old native of Lebanon, was a naturalized citizen of the U.S. By day he worked as a carpet installer from 2007 to 2008. He then operated a low-end car dealership. During that period he bought more than $154,000 worth of what he thought were stolen electronics and cars from undercover agents.
⁵⁵
While he sold some of the stolen product for personal profit, he was allegedly smuggling merchandise to South America, with the proceeds benefitting the Hezbollah, according to court documents.

What Hamdan didn’t know was that his smuggling was also playing a pivotal role in helping law enforcement investigate high-level Hezbollah operatives who were selling counterfeit cash to purchase assault weapons to be shipped overseas. Using the money made from the sale of stolen and smuggled merchandise, Hezbollah operatives worked “18 hours a day producing high-quality counterfeit currency for the Hezbollah.”
⁵⁶
In addition, Hamdan helped his co-conspirator and well-connected Hezbollah operative, Dib Hani Harb (who was also involved in producing the counterfeit currency), broker a meeting between the FBI informant and Hassan Hodroj, a member of Hezbollah’s political bureau in Beirut. Hodroj requested 1,200 Colt M4 machine guns, a model used by U.S. special forces, for which Hodroj said he would pay $1,800 per gun.
⁵⁷
“His arrest there underscores the global nature and reach of Hezbollah’s financial and logistic support,” said Levitt in an interview with me.