Potential FATF sanctions: Can Lebanon curb the risks of a cash-fueled economy amid financial crimes?

Report by Lea Fayad, English adaptation by Yasmine Jaroudi

Lebanon is seeing an influx of cash, with at least $10 billion entering the country annually from remittances, tourist spending, and international aid, all bypassing the banking system, according to the World Bank's 2022 report. 

This figure represents nearly half the size of the nation's economy—a situation fraught with risks.

Unlike bank transfers and checks, the untraceable nature of cash flows increases the potential for tax evasion, smuggling, corruption, money laundering, and even terrorism financing. 

The growing reliance on cash also heightens the likelihood that Lebanon could be placed on the Financial Action Task Force (FATF) grey list this fall, leading to stricter international dealings with the country.

What steps is Lebanon taking to try to limit financial crimes?

In response, Lebanese banks and money transfer companies have enhanced their monitoring mechanisms and are collaborating closely with the Banque du Liban (BDL) to trace every dollar's origin. 

Meanwhile, the judiciary is tightening accountability measures in line with recent FATF recommendations.

Judge Sabouh Sleiman noted that new investigative techniques in financial crimes are being developed, which will be handled independently by the Internal Security Forces (ISF).

However, these efforts are insufficient, according to participants at the Annual Forum on Combating Money Laundering and Terrorism Financing held in Beirut.  

The event, which gathered Lebanese, Arab, and international experts, emphasized the urgent need for more robust legislation and reforms.

The forum's key message was clear: Lebanon must break free from its cash-based economy and associated problems. 

The path forward lies in comprehensive reforms, restoring confidence in the banking sector, and recovering depositors' funds.