BELIEF, Banking Crisis, Grey List, Economic Update

Lebanon Faces Potential FATF Gray Listing, Threatening Further Economic Isolation

12:38 | 30 September 2024LIMS output
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الضريبة المسطحة

Lebanon is at risk of being added to the Financial Action Task Force (FATF) gray list this fall, placing it among high-risk countries flagged for inadequate efforts in combating money laundering and terrorist financing. With only four of FATF’s forty recommendations implemented, Lebanon’s shortcomings have raised red flags.

The recent arrest of former Central Bank Governor Riad Salameh in early September initially spurred hopes that Lebanon might be moving toward compliance, given Salameh’s prosecution in multiple jurisdictions. However, LIMS argued that his case is peripheral to Lebanon’s larger gray-listing risks. While the banking sector generally meets international standards, compliance measures must be extended to other sectors, especially given the surge in cash transactions across the economy.

Among FATF’s core concerns are unmonitored transactions in Lebanon’s gold, precious metals, and real estate sectors, which present significant channels for laundering illicit funds. Additionally, FATF has urged Lebanon to improve judicial coordination, strengthen investigative units, and enhance its ability to freeze assets. Government inaction on drug trafficking and corruption remains a pressing issue, further weighing on Lebanon’s FATF compliance.

The economic consequences of gray listing are severe. Although the acting governor of the Central Bank has stated that correspondent banks will maintain relations with Lebanon, LIMS warns that they will likely increase transaction scrutiny. This added oversight will drive up transaction costs for customers, expatriates, and investors, further complicating Lebanon’s economic landscape, particularly as conflict continues. Gray listing would also deter foreign investment due to concerns over money laundering risks, stifling job creation and economic growth.

In short, Lebanon’s government must urgently address FATF requirements to prevent further erosion of its financial standing and to safeguard what remains of its international reputation.

  • Lebanon Still Faces Challenges In Being Added To The Gray List, September 19, 2024: VDL, Audio Interview AR
  • Lebanon May End Up On The Gray List Of The Financial Action Task Force, September 13, 2024: Tafasil, Video Interview AR
  • This Is The Basket Of Required Reforms, Otherwise Lebanon Will Be On The ‘Gray List, September 6, 2024: Annahar, Article AR
  • The ‘Gray List’ Is A New Threat: Lebanon Must Commit To International Financial Decisions, September 6, 2024: Janoubia, Article AR