SUSPICIOUS ACTIVITY REPORTING IN LEBANON: FINANCIAL INSTITUTIONS URGED TO EXERCISE CAUTION

Combating Money Laundering and Financial Crimes in Lebanon

The United States Financial Crimes Enforcement Network (FinCEN) has issued an advisory urging banks and other financial institutions to exercise heightened scrutiny when dealing with transactions originating in or routed through Lebanon. This move aims to combat money laundering and financial crimes, which are hindered by serious systemic problems in Lebanon’s banking system.

Challenges in Lebanon’s Counter-Money Laundering Regime

Lebanon’s commitment to bank secrecy and lack of effective supervisory and enforcement mechanisms make it difficult to detect and prevent financial crimes. Some key issues in the country’s counter-money laundering regime include:

Bank Secrecy Laws

• Lebanon’s 1956 Law on Bank Secrecy prohibits bank managers and employees from revealing client names or information about their assets and holdings.

Numbered Accounts

• Only bank managers know the identities of account-holders with numbered accounts, which can make it difficult to track suspicious activity.

Limited Access to Financial Records

• The Banking Control Commission does not have access to individual account information or depositor names.

FinCEN’s Advisory: Enhanced Scrutiny and Reporting

FinCEN’s advisory urges banks and other financial institutions operating in the United States to carefully examine transactions involving Lebanese entities and accounts. This includes reporting any suspicious activity in accordance with 31 C.F.R. 103.18 (formerly 31 C.F.R. 103.21).

Lebanon’s Efforts to Improve Its Counter-Money Laundering Regime

Lebanese officials have acknowledged the need to address these deficiencies and have taken steps to improve their counter-money laundering regime. These include:

Due Diligence Convention

• Lebanese banks are now required to comply with this convention, which aims to combat money laundering.

Anti-Money Laundering Unit

• The Banking Control Commission has formed an anti-money laundering unit to coordinate efforts.

Conclusion

The advisory emphasizes that the issuance of this alert does not mean that U.S. financial institutions should curtail legitimate business with Lebanon. Instead, it highlights the need for enhanced scrutiny and cooperation between financial institutions and regulatory authorities to prevent and detect financial crimes.