On October 23rd, the Financial Crimes Enforcement Network (“FinCEN”) issued a supplementary alert regarding countering financing of the U.S.-designated foreign terrorist organization Hizballah (the “Alert”). In May 2024, FinCEN published an initial alert that focused on the countering of financing Iran-backed terrorist organizations, including Hizaballah. This Alert focuses solely on Hizballah and indicates that as part of the U.S. Department of the Treasury’s (“Treasury”) campaign against Hizballah for the past two decades, financial institutions (“FIs”) must remain vigilant in identifying suspicious activity of the terrorist organization.
According to the Alert, is it estimated that Iran has provided $700 million per year in support of Hizballah. Hizballah is known to generate revenue through various illicit activities including oil smuggling, money laundering, black market money exchange, counterfeiting, and illegal weapons procurement. Funds are laundered through businesses in West Africa, Europe, and South America.
In an accompanying press release, FinCEN Director Gacki noted that the Alert was released in part due to Hizaballah’s recent attacks against Israel. In addition, the Alert is consistent with FinCEN’s National Priorities, which include domestic and foreign terrorism.
Hizballah Money Laundering Activities
The Alert highlights that Hizballah uses a network of both front companies and legitimate businesses to launder funds. Legitimate business sectors include real estate, import/export, construction, diamonds and precious stones, and high-value art. Hizballah engages in trade-based money laundering, commonly transferring electronics and used cars. In addition, Hizballah engages in bulk cash smuggling and is known to start its own money transfer businesses and use unlicensed money service businesses in Lebanon and elsewhere to launder funds.
Treasury’s 2024 National Terrorist Financing Risk Assessment highlighted that Hizballah continues to utilize the U.S. financial system to launder funds, including transferring funds through the U.S. financial system and purchasing military or export-controlled equipment through front companies. We have blogged on Treasury’s Risk Assessment here.
Red Flags
The Alert identifies a number of red flags aimed at helping FIs to detect, prevent, and report potential suspicious activity related to Hizballah terrorist financing. As we have commented before in similar contexts, the suggested red flags often assume awareness of information that would require a FI to perform a high degree of due diligence into the specifics of particular transactions between the FI’s customer and the customer’s customer.
A few of the red flags include:
- A customer or a customer’s counterparty conducts transactions with entities and individuals that OFAC has designated due to their connection with Hizballah, or conducts transactions that contain a nexus to identifiers listed for OFAC-designated entities and individuals affiliated with Hizballah, to include email addresses, physical addresses, phone numbers, passport numbers, or convertible virtual currency addresses;
- A customer or a customer’s counterparty uses the services of a foreign financial institution that has been identified as a “primary money laundering concern”;
- A customer conducts transactions with a money service business or financial institution, including those that offer convertible virtual currency, that operates in jurisdictions known for a high risk or Hizballah terrorist financing activity and has opaque ownership or business owners are known associates of Hizballah;
- Transactions and wire transfer refer to commercial activity that involves bills of lading with no consignees or involves vessels that have been previously linked to suspicious financial activities or registered to sanctioned entities connected with Hizballah;
- A customer with businesses in real estate, export/import, construction, diamonds and precious stones, or high-value art sectors with numerous international counterparties in high-risk jurisdictions for Hizballah financing, makes an unusually high number of cash deposits in business accounts, transfers funds from business to personal accounts or vice versa, or uses personal accounts or personal credit cards to make business payments.
Financial institutions are asked to reference this alert in suspicious activity report narratives using the term “IRANTF-2014-A001.”
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