- 14
- Aug.
- 2024
What if Lebanon Is Placed on FATF’s Gray List?
modified on 02 Sep. 2024 à 10:29 Read : 4 minute(s) A A A
Wassim Mansuri, the Acting Governor of Lebanon's Central Bank (BDL), is set to travel to Washington, D.C., in the first week of September, in an attempt to shield Lebanon from being placed on the Financial Action Task Force's (FATF) gray list, which monitors countries for financial crimes. His visit comes just days before a critical meeting where the organization will determine which nations have met the required standards and which have fallen short.
Lebanon has repeatedly received grace periods from the Financial Action Task Force (FATF) last year at the request of the BDL, in the hope that the Lebanese government and official bodies would take the necessary measures to prevent Lebanon from being placed on the gray list. However, to date, none of the promised reforms have been implemented by the Lebanese government, nor has the Parliament succeeded in passing the laws and regulations that FATF deems essential to strengthen Lebanon's financial system. There's also a notable lack of judicial decisions against individuals accused of money laundering.
As for the measure taken by the BDL, the latest report from the Financial Action Task Force (FATF) confirmed that the exceptional steps implemented by Lebanon’s Central Bank fully comply with the organization’s requirements for countering money laundering and the financing of terrorism. However, the weakest link remains the failure of successive governments and Parliament to enact the required legislation, compounded by the absence of judicial reforms needed to prosecute those the organization identifies as corrupt.
What Lies Ahead for Lebanon?
Wassim Mansuri will be visiting major international capitals to advocate for more time before Lebanon is added to the gray list. He will highlight the importance of the measures implemented by the BDL and Lebanese banks, which comply with international standards for financial transactions, transfers, and anti-money laundering. BDL’s Acting Governor will also argue that placing Lebanon on the gray list could worsen tax evasion, increase money laundering, and undermine the Central Bank's efforts to address these issues. Once more, the FATF and the MENAFATF (Middle East and North Africa) FATF will question Mansuri about the state’s overall progress on reforms, especially regarding anti-corruption measures and judicial decisions related to money laundering. Information suggests that progress on paramilitary groups has been limited, and Wassim Mansuri is expected to address this issue in the upcoming phase.
When FATF puts a country on the gray list, it subjects that country's financial and banking activities to international oversight. This will include rigorous monitoring of all money transfers from Lebanon, whether conducted by the government or the BDL, to ensure their legitimacy and purpose. Furthermore, there is a risk that correspondent banks may sever ties with Lebanese banks, which could also restrict the flow of new investments and capital into the Lebanese market.
In recent months, BDL’s Acting Governor has managed to increase the number of correspondent banks dealing with Lebanon, from one to six. In this context, it appears that Mansuri has successfully convinced these banks of BDL’s measures against money laundering and the financing of terrorism. As a result, banking operations and transfers to and from Lebanon are likely to remain stable, even if FATF decides to place Lebanon on the gray list. This situation mirrors what has occurred with several countries worldwide, such as the UAE and Monaco, which were later removed from the gray list after implementing the required reforms. To this end, Wassim Mansuri visited the US Departments of State and Treasury, as well as the International Monetary Fund and the World Bank, to persuade decision-makers that the actions and measures taken by BDL and Lebanese banks meet FATF’s standards for compliance with international laws and transparency.
According to Mansuri’s sources, BDL’s Acting Governor has informed relevant stakeholders that placing Lebanon on the gray list would undermine the Central Bank’s efforts, increase the risks of money laundering, and further isolate a country already grappling with dwindling liquidity. During his meetings in the US, Wassim Mansuri managed to persuade some stakeholders, but was less successful with others. Although he did not secure a definitive agreement to delay Lebanon’s placement on the gray list, his sources confirm that correspondent banks are committed to continuing their operations with Lebanon, even if it is added to the gray list. Furthermore, FATF and the correspondent banks agree that the real issue lies not with the Central Bank and the banks, but with the government and the judicial authorities. Therefore, the MENAFATF is committed to not severing financial and banking relations with Lebanon and to ensuring that regular banking activities are not subject to any potential punitive measures.
From this standpoint, placing Lebanon on the gray list could be seen as a tactic to pressure Lebanese authorities into addressing the risks at hand. Failure to address these issues promptly could lead to more severe consequences.
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