Lebanon nears placement on FATF Grey List

Lebanon's imminent placement on the Financial Action Task Force's (FATF) Grey List, a group specialized in setting international standards for combating money laundering and terrorism financing, has sparked concerns over the country's effectiveness in these areas and the need for enhanced oversight from international institutions.

The decision to include Lebanon on the Grey List is expected to be made soon, according to financial and banking sources.

But what does this mean for the country?

First, this decision primarily affects banking transactions and not money transfers through remittance companies. Any import, export, or money transfer conducted through local banks will experience significantly longer processing times, as correspondent banks abroad will subject these transactions to heightened scrutiny and verification of their source of funds.

Furthermore, these correspondent banks may reconsider their dealings with Lebanon, especially when the level of engagement with foreign banks has already diminished due to the ongoing crisis.

Moreover, if international intervention fails to rescue Lebanese banks, the country could face complete isolation from the global financial system, making it extremely difficult to import even the most basic goods.

What are the reasons behind Lebanon's potential isolation?

1. The significant growth of the cash-based economy, which now constitutes nearly half of Lebanon's economy, according to the World Bank, poses challenges in regulating money laundering operations.

2. The financial state and failure of Lebanese banks.

3. Ineffectiveness of Lebanon's anti-money laundering system.

4. The most critical factor: International judicial decisions, particularly concerning the Governor of the Central Bank of Lebanon, implicating him in money laundering activities.

Will Lebanon be completely isolated from the world?

If Lebanon is placed on the Grey List, it must take immediate action to rectify its situation. A new evaluation is conducted every six months.

However, failing to address the issues at hand could result in Lebanon's classification being downgraded to the Black List, which currently includes only three countries: Iran, North Korea, and Myanmar.

The country must urgently implement comprehensive measures to strengthen its financial systems, enhance anti-money laundering capabilities, and restore international confidence.