Lebanon’s Financial Intermediation Institutions Face Stricter Regulations
Beirut, Lebanon - The Lebanese government has introduced a new law aimed at regulating financial intermediation institutions operating in the country. This law, published in the Official Gazette earlier this week, imposes strict rules on these institutions to ensure their activities are transparent and comply with international standards.
Key Provisions
- Financial intermediation institutions are prohibited from receiving deposits or lending money to clients without a written agreement (Article 17).
- They are banned from opening joint accounts with clients or consolidating financial instruments deposited by clients in their accounts or with third-party banks.
- Institutions must obtain funds only through partnerships, shareholders, or debt instruments issued under the Code of Commerce and other relevant laws.
- Operating on behalf of clients without a written contract is prohibited. The contract must include specific details such as type of management, beneficiary party, and address for sending account statements.
Penalties for Non-Compliance
- Delay fines: Up to ten times the minimum monthly salary for each day of delay (Governor of the Banque du Liban).
- Liquidation: Financial institutions that fail to comply with the law’s obligations may be struck off the list of approved institutions.
- Administrative sanctions: Issuing warnings, prohibiting specific operations, appointing controllers, or striking them off the list.
Criminal Penalties
- Imprisonment for six months to three years and/or a fine not exceeding ten times the minimum annual salary for anyone found guilty of violating the law’s provisions.
Implementation Timeline
- All Lebanese financial intermediation institutions and foreign branches operating in Lebanon must regularize their situation within six months from the publication of the law.
- Failure to comply will result in penalties and possible liquidation.
Rationale Behind the Law
The new law aims to enhance transparency, stability, and confidence in the Lebanese financial system, which has faced challenges in recent years due to regional instability and economic uncertainty. The government hopes that stricter regulations will help protect investors and ensure the country’s financial sector remains competitive.