Financial Crime Enforcement Agencies Sound Alarm on Lebanon Transactions
Financial institutions operating in the United States have been advised to exercise heightened scrutiny over all transactions originating from or routed through Lebanon, or involving entities and accounts based in the country. This warning comes amid concerns over systemic problems plaguing Lebanon’s anti-money laundering regime.
Lebanon’s Banking System: Challenges and Concerns
Lebanon has made significant strides towards economic recovery following a devastating civil war that ravaged the nation between 1975 and 1991. However, the country’s banking system remains hampered by strict bank secrecy laws and inadequate supervisory mechanisms.
- Bank Secrecy Laws: Lebanon’s 1956 Law on Bank Secrecy prohibits bank managers and employees from revealing client names or information regarding assets and holdings to any authority, including law enforcement agencies.
- Inadequate Supervision: The Banking Control Commission lacks access to individual account information and depositor identities due to the secrecy laws. Numbered accounts are also permitted, with only bank managers aware of the identities of account holders.
Deficiencies in Lebanon’s Anti-Money Laundering System
Lebanon’s anti-money laundering system has several other deficiencies, including:
- Lack of Reporting Requirements: There is no requirement for reporting suspicious activity.
- Limited Criminal Sanctions: Money laundering offenses are not adequately penalized.
These shortcomings have led the Financial Action Task Force on Money Laundering (FATF) to classify Lebanon as non- cooperative in the fight against money laundering.
Efforts Towards Reform
Despite these challenges, Lebanese officials have acknowledged the need for reforms and have taken steps towards improving their anti-money laundering systems. The country’s banks are now required to comply with the Due Diligence Convention, a set of guidelines aimed at combating drug-related money laundering.
US Financial Institutions’ Advisory
Financial institutions operating in the United States have been advised to exercise heightened scrutiny over transactions involving Lebanese entities and accounts due to the ongoing risks posed by Lebanon’s anti-money laundering regime. The Treasury Department has emphasized that this advisory does not mean that US financial institutions should curtail legitimate business with Lebanon.
Call for Technical Assistance
In a statement, James F. Sloan, Director of the Financial Crimes Enforcement Network (FinCEN), emphasized that US officials stand ready to provide technical assistance to Lebanese authorities as they work to address the deficiencies in their anti-money laundering systems.