- 05
- Sep.
- 2024
Correspondent Banks: Transfers Safe Despite Potential Grey Listing
modified on 26 Sep. 2024 à 05:39 Read : 4 minute(s) A A A
Wassim Mansouri, Acting Governor of the Central Bank of Lebanon (BDL), is meeting in London with officials from correspondent banks that interact with Lebanese banks. The goal is to address potential impacts of any negative decisions taken by the Financial Action Task Force (FATF) ahead of its crucial meeting to assess countries' compliance with anti-money laundering and counter-terrorism financing standards.
Lebanon is closely watching the FATF meeting set for October 24 in Paris. The decision on whether Lebanon will be placed on the grey list for insufficient compliance with anti-money laundering and counter-terrorism financing measures remains uncertain, depending on developments and last-minute efforts in the coming days.
Wassim Mansouri, Acting Governor of BDL, met with major correspondent banks, including JPMorgan Chase, Citibank, Bank of New York and Morgan Stanley.
These banks have increased in number in the past few months and resumed their transactions with Lebanon. Mansouri received assurances that the relationship between these banks and the Lebanese banking sector, including BDL, will remain stable even if Lebanon is placed on the FATF grey list. This stability is crucial for maintaining international banking transfers between Lebanon and other countries. Nevertheless, avoiding inclusion on the grey list is increasingly difficult, as the FATF views Lebanon's judicial efforts as inadequate in addressing critical threats and risks, particularly customs enforcement, anti-smuggling, tax evasion and trafficking in drugs and humans. Additionally, the FATF is concerned about Lebanon's lack of a clear mechanism for identifying, freezing and seizing the proceeds of financial crimes according to its standards.
Moreover, and despite ongoing efforts, Lebanese judicial authorities have yet to implement effective mechanisms for seizing the proceeds of such financial crimes or establish clear procedures for recovering assets that have been confiscated or moved to other jurisdictions. Meanwhile, the potential threats posed by major local militant groups remain unresolved and poorly addressed.
It is important to note that Lebanon has overcome significant challenges, including its 2000 designation by the FATF as a non-cooperative country in combating money laundering. This was due to banking secrecy laws that hindered international investigations and the lack of a dedicated anti-money laundering law at that time.
Subsequently, Lebanon took crucial steps, including enacting an anti-money laundering law in accordance with FATF recommendations, establishing a comprehensive regulatory framework, creating a specialized authority for money laundering investigations and enhancing coordination among security and judicial agencies to define responsibilities and allocate roles effectively.
In 2002, Lebanon was removed from the list of non-cooperative countries, marking the beginning of its improved standing in the international arena. In 2015, the Lebanese Parliament enacted several key laws, including accession to the United Nations International Convention for the Suppression of the Financing of Terrorism, amendments to the anti-money laundering and counter-terrorism financing laws, the law on cross-border cash declarations and the law on tax information exchange. In 2020, Lebanon introduced the Anti-Corruption in the Public Sector Law, establishing the National Anti-Corruption Commission. In 2021, Parliament passed legislation for the recovery of assets obtained from corruption-related crimes. The Central Bank of Lebanon has also issued necessary circulars to align with these laws and strengthen the resilience of Lebanese banks and financial institutions.
The crisis in Lebanon has driven economic activity outside the formal banking sector, resulting in a shift to a cash-based economy and an increase in informal economic activity. Such a cash-based economy poses challenges for the global financial system and is subject to scrutiny from international financial institutions and correspondent banks, notably highlighted by the FATF in its anti-money laundering and counter-terrorism financing evaluation report. To address these issues, the Central Bank of Lebanon issued Circular 165, which allows the opening of new accounts for cash deposits in both US dollars and Lebanese pounds. These accounts are designed to facilitate the electronic settlement of cash transfers and the clearing of checks exchanged in cash. This measure aims to mitigate money laundering and terrorism financing, reduce reliance on cash and encourage the adoption of electronic payment methods.
Sources close to Mansouri confirm his strong emphasis during meetings with correspondent banks on revisiting the recent Middle East and North Africa Financial Action Task Force (MENAFAT) report. Issued in recent months, the report highlights the critical importance of the measures implemented by BDL and Lebanese banks to strengthen controls against suspicious activities including money laundering, terrorism financing and corruption-related financial crimes.
The regional group's evaluation report also emphasizes the necessity for local authorities to make significant improvements based on several key recommendations. This includes amending existing laws to align more closely with international standards for combating money laundering and terrorism financing.
The report particularly stresses the need for stronger measures to pursue and seize criminal proceeds and related assets, as well as for more consistent and effective legal actions against money laundering crimes. It highlights the importance of implementing proportional and deterrent penalties to address these risks adequately.
Sources close to Mansouri emphasize the need for the Lebanese government to develop a collaborative action plan with all relevant local stakeholders, supported by the legislative authority and policymakers. This plan should address existing gaps and enhance the effectiveness of Lebanon’s anti-money laundering and counter-terrorism financing framework.
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