Money laundering concerns: Can Lebanon avoid being included on FATF's "Grey List"?

Report by Yazbek Wehbe, English adaptation by Yasmine Jaroudi

For over two years, the Financial Action Task Force (FATF), an international body established in 1989 by the G7, has considered placing Lebanon on its "grey list" due to "unsatisfactory practices" in combating money laundering. 

However, the decision has been repeatedly postponed.

A crucial meeting scheduled for early September may be the final evaluation of Lebanon's adherence to anti-money laundering and counter-terrorism financing standards. There are concerns that Lebanon might receive a negative evaluation, resulting in its classification on FATF's grey list. 

This classification could severely damage Lebanon's already fragile economy, particularly its banking sector, which would face isolation from the global financial system. This isolation could hinder the ability to finance imports and conduct international transfers through correspondent banks, further deteriorating Lebanon’s international reputation and trust.

To mitigate these potential repercussions, acting Banque du Liban (BDL) governor, Wassim Mansouri, has traveled to the United States for a series of meetings with officials from the US Treasury, Congress, the International Monetary Fund (IMF), and the World Bank. 

He aims to present the recent measures taken by BDL to curb money laundering. 

Nonetheless, these measures may fall short in the eyes of the FATF, especially given the persistently high rate of cash transactions in Lebanon, which complicates efforts to control money laundering.

Mansouri may seek to delay the FATF's evaluation once again, promising the implementation of additional measures. 

Banking sources suggest that the prevalence of a cash economy is a consequence of the Lebanese Parliament's delay in enacting necessary reforms, including capital control laws and bank restructuring, which would facilitate a return to standard financial operations.

Could the potential inclusion of Lebanon on the grey list be a form of political pressure from the United States, driven by Lebanon's slow progress in implementing reforms and electing a new president?

Observers note that while Washington previously tolerated delays in Lebanon's evaluation, it is unlikely to do so now given the lack of response to international demands.