Lebanon takes swift action to address US concerns over terrorism financing, but is it enough?
The US Treasury’s demands have put Lebanon’s financial system under the spotlight, with a visiting delegation urging authorities to take immediate steps to curb the funding of Hezbollah, a powerful political and military organization. This move has sparked a rapid response from Lebanon, but it’s a delicate balance between international pressure and domestic politics.
The Lebanese government and the Central Bank (Banque du Liban) have begun a technical response process, aiming to strengthen the compliance environment within the financial sector. This comes after the US Treasury’s request to cut off Hezbollah’s funding sources, which include various financial institutions and unregulated channels.
But here’s where it gets controversial: the central bank’s measures extend beyond financial compliance, touching on the politically charged issue of weapons control. The initiative includes applying stricter regulations to non-bank financial institutions, such as money transfer companies and exchange houses, which have allegedly been used by Hezbollah for illicit transactions.
According to sources, the US Treasury delegation emphasized the need to close loopholes that allow Hezbollah to receive funds through unregulated methods, including cash, gold, and even cryptocurrencies. This has led to a series of meetings with Lebanon’s top officials, revealing a complex web of financial connections.
A key figure in these discussions, John Hurley, the Undersecretary of the Treasury for Terrorism and Financial Intelligence, highlighted the importance of electronic payment systems in tracking and controlling financial flows. The central bank is now promoting digital payments in retail sectors, a move that could significantly impact Hezbollah’s funding.
However, the central bank’s statement also clarifies that these measures are not solely aimed at Hezbollah. They are part of a broader effort to enhance Lebanon’s standing in the global financial community, specifically by addressing gaps in combating illicit transactions, as indicated by the Financial Action Task Force (FATF) ‘grey list’.
And this is the part most people miss: the central bank’s actions are a delicate dance, aiming to satisfy international demands while navigating domestic political sensitivities. The measures are designed to avoid provoking Hezbollah, which is a significant political force in Lebanon, while also meeting the US Treasury’s expectations.
The Banking Control Commission will play a crucial role in overseeing this process, ensuring compliance and taking corrective action. The success of these measures will be a test of Lebanon’s ability to balance its internal politics with the demands of the international community, particularly in the fight against terrorism financing.
What do you think? Is Lebanon’s response adequate, or does it fall short of addressing the core issues?