Barely avoiding Grey List
through a year grace period

FATF gives Lebanon a reprieve to reform

The Financial Action Task Force (FATF), a financial crime watchdog, has granted Lebanon a one year grace period to implement financial, monetary, and banking reforms before placing it on the ‘Jurisdictions under Increased Monitoring’, also known as the ‘Grey List’. LBCI first reported on the news.

The FATF list includes countries that have insufficient measures in their anti-money laundering and combating the financing of terrorism (AML/CFT) laws and procedures, or are not in line with international standards.

According to Reuters, Lebanon’s score was one mark over the threshold to be grey-listed. It has scored as only partially compliant in several categories, including anti-money laundering measures, transparency on beneficial ownership of firms and mutual legal assistance in asset freezing and confiscation. The Middle East and North Africa section of the FATF shared the scoring with member states this week in a meeting in Bahrain.

The risk of grey listing comes as the cash economy has taken an expanded share of business transactions. The World Bank has estimated it at more than 45 percent of the entire economy.

South Africa was added to the FATF list in February and the United Arab Emirates was added in March 2022.

In 2016, Lebanon was removed from the FATF surveillance watch list. At the time, FATF had said that Lebanon was fully complying with all requirements to combat money-laundering and terrorism financing. The removal was in part an acknowledgement of the emergency legislation passed in November 2015, including an anti-money-laundering law covering trans-border cash movements, co-operation to fight tax evasion and measures to cut off resources used for terrorism.

Paris-based FATF, which was established in 1989, is a global money laundering and terrorist financing watchdog. The inter-governmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society. As a policy-making body, FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. It sets international standards to ensure national authorities can effectively go after illicit funds linked to drug trafficking, illicit arms trade, cyber fraud and other serious crimes. In total, more than 200 countries and jurisdictions have committed to implement the FATF Standards as part of a coordinated global response to prevent organized crime, corruption, and terrorism.

The Central Bank’s Special Investigation Commission (SIC) said that some media reports claiming that Lebanon could be included in the ‘Grey List’ were not based on real facts. It said that the mutual evaluation report about Lebanon was discussed during the 36th Plenary Meeting of the Middle East and North Africa Financial Action Task Force (MENAFATF) held in Bahrain. SIC said the report, which will be released in June, will identify the gaps that must be addressed and will point to the positive side of the Lebanese system of combating money laundering and terrorism financing. It said Lebanon will have to take the necessary measures to address any gaps and will submit a follow-up report to MENAFATF in 2024.