Indicted Paraguay-Based Money Launderer Linked to Broader Illicit Finance Schemes in South America’s Tri-Border Area

Indicted Paraguay-Based Money Launderer Linked to Broader Illicit Finance Schemes in South America’s Tri-Border Area
Insights 9 minute READ 04/29/2021

A Paraguay-based currency exchange operator indicted in two U.S. jurisdictions on several money laundering-related charges is linked to broader contraband and money laundering schemes in South America’s Tri-Border Area (TBA), according to public records.

These cases demonstrate how currency exchange dealers continue to act as key nodes in international money laundering schemes, while also providing greater insight into how and to what extent disparate illicit financial networks converge in the TBA. The federal investigations also highlight the ongoing risk of U.S.-based import/export firms in either knowingly or unknowingly facilitating trade-based money laundering.

Arrest and extradition of Paraguay-based currency exchanger

In May 2018, Paraguayan authorities raided the office of Cambios Unique S.A., a currency exchange house located in Ciudad del Este, Paraguay. Ciudad del Este is located in South America’s Tri-Border Area, a region where the borders of Argentina, Brazil, and Paraguay converge — the area has long been known as an epicenter of organized crime in South America.

During the raid, the authorities arrested Lebanese national and naturalized Brazilian citizen Nader Mohamad Farhat along with his Taiwanese wife Pei Yu Wu, and seized over $1 million in cash. Paraguayan authorities allege that Farhat has links to the Lebanon-based Shia militant and U.S.-designated terrorist group Hezbollah, although it is unclear what those links are.

Farhat was later extradited to the United States in June 2019 where he’s been charged with several money laundering-related crimes in two separate cases in South Florida and New York. U.S. prosecutors allege that Farhat used his currency exchange house in Paraguay to facilitate hundreds of millions of dollars in transactions on behalf of Paraguay-based import/export companies, a portion of which allegedly involved drug-related proceeds.

While Farhat’s indictments themselves provide very little information on his alleged illicit financial schemes, a criminal complaint for a Miami-based Farhat associate — Diya Salame — provides additional details.

U.S. law enforcement agents first began investigating Farhat’s network in 2013, according to an affidavit in support of Salame’s complaint written by DEA Special Agent Daniel McNamara. The investigation began after a Mexico-based money launderer “instructed a DEA confidential source to deliver over $500,000 in cash that had been picked up in Detroit, minus commission, to a Farhat associate in Miami, Florida.”

As a result, DEA agents began investigating Farhat’s network and discovered that between 2014 and 2015 “approximately $600,000 in purported drug proceeds were delivered to Farhat or persons directed by Farhat to receive funds on his behalf in South Florida and Paraguay,” according to the affidavit.

In an unrelated case in New York, Farhat was listed as a defendant along with four other individuals, including the owner of a Paraguay-based import/export company — Mahmoud Ali Barakat. Federal prosecutors alleged that Barakat used his Paraguayan electronics business — Planeta Cell Import – Export, S.A. — to engage in trade-based money laundering (TBML). In that scheme, Barkat employed the use of Farhat’s money exchange business to wire funds to U.S.-based cell phone exporters.

Barkat eventually pleaded guilty to money laundering conspiracy and was sentenced to 37 months in prison in November 2020. Both of Farhat’s New York and South Florida cases are ongoing.

Connections to alleged New York/Miami TBML scheme

The Farhat/Barkat case in New York is related to a TBML scheme involving several family members and electronics companies based in New York and South Florida. In this scheme, an individual by the name of Enayatullah Khwaja and his cousin Abdulrahman Khwaja oversaw a network of electronics companies that were allegedly used to repatriate drug proceeds back to South America between 2013 and 2018.

In essence, the Khwaja cousins, their associates, and several of their electronics companies “used the actual and purported purchase and export of mobile phones to transfer monetary proceeds from the illegal sale of narcotics and financial crimes in the United States to drug dealers and co-conspirators throughout South America and elsewhere,” according to a November 2018 indictment.

The Khwajas sold cell phones to Barkat who, as previously mentioned, purportedly used Farhat’s currency exchange business to conduct international wire transfers for payment. Farhat and Barakat, for their part, have also been accused of directing “bulk cash payments with illicit proceeds” for delivery to Khwaja family members, according to a letter filed by Assistant U.S. Attorney Charles Kelly.

The Khwaja network continues

In the Khwajas’ indictment, U.S. prosecutors identified a network of eight electronics companies, some of which were used to import electronics — including cell phones — into the United States. These companies would then sell the phones to other affiliated Khwaja companies, which were responsible for exporting cell phones to South America.

While prosecutors have publicly identified several of Khwaja’s electronics import/export businesses, public records suggest that newly registered companies controlled by Khwaja family members may continue to export cell phones abroad.

In July 2018, an apparent electronics business — National Wireless Inc. — registered with the New York State Department using the same address in Farmingdale, New York as two companies controlled by Abdulrahman Khwaja.

In January 2019, a Delaware-based company called Nexus Wireless Inc. registered to do business in New York. In August of the same year, the company registered to do business in Florida and listed an individual by the name of Sayed Y. Khwaja as the director. An Oct. 5, 2020 filing in the Florida Secretary of State listed the company’s mailing address as the same address in Farmingdale, New York, while its physical address was listed at the same Miami address as two additional electronics companies mentioned in the Khwaja indictment.

National Wireless, Nexus Wireless, and Sayed Khwaja have not been charged with any crimes.

Farhat’s network in Paraguay

While news reports and court filings have focused attention on Farhat’s use of Cambios Unique to facilitate international wire transfers, an analysis of his broader corporate network provides insight into his connections, albeit indirect, to alleged large-scale illicit financial activity in the TBA.

Cambios Unique is technically owned by Farhat’s wife Pei Yu Wu, according to corporate records from Paraguay’s tax authority (Subsecretaría del Estado de Tributación, SET). Pei Yu, in turn, is the sister-in-law of Walid Amine Sweid, a Paraguay-based Lebanese businessman who has long been accused of overseeing large contraband smuggling and money laundering operations via his import/export businesses in the TBA and East Asia.

Pei Yu is the owner and/or legal representative of four additional companies in Paraguay; on two of those companies — Fat Sisters SA and Grupo Spaltec SA — Pei Yu serves as a co-shareholder along with her sister and wife of Sweid — Pei Ti Wu (see Figure 1.).

Fig 1. Sayari Graph network showing the indirect corporate connection between Nader Mohamad Farhat’s currency exchange business Cambios Unique and Walid Amine Sweid. Cambios Unique, Farhat’s wife Pei Yu Wu, and Walid Amine Sweid are circled in red.

Grupo Spaltec forms part of a cluster of companies with the same name, including Paraguay-based Spaltec SA, and Hong Kong-based Spaltec International Group Limited. Walid Amine Sweid is likely the ultimate beneficial owner of all three companies. Trade data suggests Walid uses Spaltec International Group in Hong Kong to supply companies he owns or that are affiliated with his extended network in the TBA.

However, investigations in the last several years by Paraguayan authorities suggest some of these trading schemes may be an attempt to launder illicit proceeds. In 2018, local media sources reported that Paraguayan authorities were investigating millions of dollars in payments for suspicious purchases sent to Spaltec International Group in Hong Kong on behalf of Paraguayan importers.

Several of the Paraguayan importers found to be sending the suspicious payments were owned and/or controlled by Sweid or his close business associates, including Ricardo Galeano Fariña and Jaafar Balhas. These same importers are also purportedly included in the widely known “File 68,” a sprawling investigation by Paraguayan authorities into large-scale money laundering and potential Hezbollah financing by at least 41 Paraguay-based companies.

Additional entities in Hong Kong

Sweid’s footprint in Hong Kong has extended beyond Spaltec in recent years. In 2016, a company for which Sweid is likely the ultimate beneficial owner — Rich Mark Asia Pacific Limited — was incorporated in Hong Kong. Since its inception in 2016, Rich Mark has consistently shipped a variety of different products to companies directly or indirectly linked to Sweid in Paraguay. A previous website address for Rich Mark is also listed in a corporate profile for the representative office of Spaltec International Group in Shenzhen, China.

Although Sweid’s name does not currently appear on the corporate documents for either Spaltec International Group or Rich Mark, the two companies are currently owned by Law Kwong Wah, a Hong Kong national who likely serves as a proxy for Sweid.

Kwong Wah is also listed as the legal representative of Spaltec International Group’s representative office in Shenzhen, China, as well as the sole shareholder and director of an additional Hong Kong company called Ocean Wide Group Limited. Ocean Wide is a co-shareholder of a Paraguay-based tobacco products company that has been linked to Sweid called Flavors of Americas SA.

Convergence of multiple illicit networks

A broader analysis of Sweid’s corporate network — and by extension, Farhat’s — may provide leads into the convergence of these networks with other illicit finance schemes in the TBA, namely those connected to Brazil’s most infamous money launderer Dario Messer.

Sweid was the previous co-owner of Avient Latin American SA, a transport company located in Ciudad del Este, according to tax data from Paraguay’s SET. The company — which is currently owned by several Sweid associates, including Juan Carlos Sosa Barreto — is also under investigation for money laundering and potential Hezbollah financing as part of “File 68.”

Juan Sosa, for his part, owns a network of companies in Paraguay, including a real estate investment company called Tenonde Desarrollos SA, along with an individual named Tang En Lin. Tang En Lin, in turn, is the owner of a real estate investment company called Paraguay Land SA along with a Brazilian national by the name of Newton Rodrigo Maran Salvatti.

Newton Maran has been identified as a key business associate of convicted Brazilian money launderer Dario Messer. Dario Messer — a currency exchange operator who oversaw a scheme to launder $1.6 billion in 52 countries — was sentenced in August 2020 to over 18 years in prison and ordered to return $185 million in assets.

Fig 2. Sayari Graph network chart depicting the connections between Nader Mohamad Farhat, Walid Amine Sweid, and Newton Rodrigo Maran Salvatti. Farhat’s wife, Pei Yu Wu and the business associate of convicted Brazilian money launderer Dario Messer, Newton Maran, are circled in red.

The proximity of Sweid’s — and by extension, Farhat’s — corporate networks to a known business associate of Dario Messer, raises potential new avenues of inquiry to better understand if and to what extent these seemingly disparate illicit networks are related.

Currency exchanges, TBML, and public data

Farhat’s alleged involvement in disparate money laundering schemes in the U.S. — including one scheme that involved TBML — highlights the ongoing role that currency exchange operators play in complex, cross-border money laundering operations. While currency exchanges serve a plethora of legitimate business purposes, their key role in assisting with cross-border trade transactions make them ripe for abuse by money launderers and other bad actors.

Additionally, the Khwaja case — for which Farhat allegedly played a key role in — demonstrates the ongoing risk associated with U.S.- based import/export firms in facilitating TBML.

Further analysis of Farhat’s TBA-based network is warranted to identify the extent to which his operations converge with other illicit finance schemes present in the TBA. Open, connected public data can be key in unveiling those links.

If you’d like to learn more, join us for our upcoming Master Class on May 12 on using Public Data and Graph Analytics to detect TBML risk. Click here to sign up.

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