Argentina, Brazil and Paraguay are setting up a joint intelligence centre to monitor the area where their borders meet, known as the Triple Frontier.
The new agency - based in the Brazilian town of Foz do Iguazu - will reportedly start work in the next few days.
The move comes amid pressure from the US, which suspects members of the local Arab community have been raising funds for groups it considers terrorist.
Reports in the Argentine media say the specific worry is Hezbollah.
Correspondents say the tri-border region has long been a lawless place - home to drugs and arms smugglers as well as money launderers.
Until now, the border crossings have been poorly policed.
A large number of Arabs - many of Lebanese descent - live in the region.
The BBC's Daniel Schweimler reports that while most are law-abiding citizens, it has long been rumoured that Islamists seeking a safe place to hide often find refuge in the tri-border area.