Now U.S. officials are launching a broad series of new measures aimed at uncovering money-laundering rings that they believe are funding Hezbollah and other radical groups.

"I am highly confident that's the case," said Daniel Glaser, deputy assistant treasury secretary for terrorist financing and financial crimes. "We believe there is evidence."

The U.S. government's efforts to uncover money laundering by groups linked to terrorism depends largely on the work of local officials. But a scene stumbled upon in the darkness last week hinted at some of the challenges that U.S. and local officials face.

On a bridge connecting Paraguay and Brazil, Paraguayan border officials were sitting at tables in the dark, using flashlights to check the passports of a tiny fraction of those who crossed, perhaps one in 20 drivers, according to an informal count.

At the same time, a short distance upstream, two small boats slipped across the water. The boats carried nearly 1,400 pounds of marijuana, bound tightly in bricks of packing tape and stuffed into cardboard boxes. The only reason Paraguayan federal agent Maria Adelaida Vasquez found out about the marijuana was that two officers from the federal prosecutors' office coincidentally were in the neighborhood where the boats landed.

"We're not in a position to wage a battle against this kind of enterprise," said Vasquez, who said money laundering and other illegal financial transactions are increasingly intertwined with the narcotics trade. "The criminals are on the vanguard of technology, and we don't even have access to the Internet in our offices. If we have cellphones, it's because we buy them with our own money."

The 20 Paraguayan prosecutors in the region have two trucks available to use. Vasquez just happened to have access to one the other day, and she was able to arrest eight people involved in the transit of the marijuana. Catching them was pure luck, she suggested.

U.S. Treasury officials have held workshops in the region to encourage more banking sector involvement in regional efforts against money laundering. The Department of Homeland Security's immigration office last week sent a team to Argentina to implement a "trade-transparency unit" -- a team that will collect and analyze trade data and search for irregularities that could suggest money laundering -- and will equip a similar unit in Paraguay in September.

Meanwhile, the State Department this year helped draft stricter anti-money-laundering legislation that was passed by Argentina's congress. The U.S. Embassy's legal adviser in Asuncion, Paraguay has held training courses during the past year for investigators and prosecutors in charge of combating possible terrorism links, according to the Justice Department.

Glaser said it is the links to Hezbollah and other radical groups that "concern us most."

U.S. officials cite a smuggling case in March in which 19 people were charged in Detroit for allegedly operating an international ring that illegally moved cigarettes through Paraguay and Brazil. The indictment alleged that profits were funneled to Hezbollah.

Additionally, in 2004 U.S. officials designated a businessman operating in Ciudad del Este a terrorist, saying he was a Hezbollah treasurer. The man, Assad Ahmad Barakat, operated a successful import-export business as a front for Hezbollah cells, the Treasury Department alleged.

Despite those charges, local prosecutors said that compiling evidence for such cases continues to be exceedingly difficult because they can't get close to the large Arab immigrant community that resides in the tri-border area, a group that numbers about 30,000 and that U.S. officials believe includes a minority of merchants who are financing groups involved with terrorism.

Neither local police nor prosecutors have a single Arabic speaker or translator, officials here said, fueling a climate rich in suspicion but lacking in evidence.

"They speak only their own language and they don't let others into that world," said Vasquez. "We suspect they are getting more involved in narco-trafficking, but it's difficult to really know because they are so closed off from us."

Samir Jebai, a Lebanese immigrant who is one of this city's most prominent businessmen, said that description doesn't fit him.

He is thoroughly connected as head of a prominent business association and has contacts in the highest levels of Paraguay's government. In addition, according to a Congressional Research Service report, his brother-in-law was among those arrested as part of Barakat's ring.

Jebai said that some years ago, when he decided it was time to help his adopted country, he called then-Education Minister Nicanor Duarte -- now Paraguay's president -- and told him he was going to build schools for the poor.

Jebai, who deals in watches, said he has been falsely labeled a terrorist in the local media, which he considers a libelous charge circulated by his commercial competitors. The suspicions of money laundering, he said, are exaggerated, and he offered an alternative explanation for the undocumented transfer of large amounts of cash: tax evasion.

In ordering a shipment of $200,000 worth of goods, he said, an importer might create a counterfeit invoice valuing the shipment at $50,000 to pay fewer duties. Then when the supplier was paid, investigators would find that $150,000 remained unaccounted for. It was a widespread practice until about six months ago, he said, before officials began more extensive checks of importers' invoices.

"Before, there was a lot more bribery with officials to avoid paying taxes," said Jebai, who also said he has seen a massive drop-off in counterfeit goods in recent years. "And the counterfeit products have disappeared 90 percent. Maybe 95 percent."

A trip to one of two warehouses where agents collect three to four tons of confiscated goods from the markets each week offers an instant corrective to that notion. The cardboard boxes are bursting open with pirated CDs and DVDs, PlayStation games, shoes, Hello Kitty dolls and watches. The air smells like tobacco, from thousands of cartons of phony Marlboros.

To get to his waiting truck from the warehouse last week, federal prosecutor Jorge Moura had to climb over disorderly boxes of CDs cluttering a doorway. On the road outside, he spotted a Mercedes-Benz, which he said reminded him of one of the biggest obstacles standing in the way of the current crackdown on trade-related crimes here.

"I can't afford a Mercedes on my income, because it's only about $700 a month," he said, nodding toward the car. "But there are a lot of people around here who can. In every sector. They are getting a lot of extra income."