Grey-listed post failing
a one-year grace period

No effect on correspondent banking.

Joins Monaco, South Africa, 20 other countries

The global anti-money laundering watchdog Financial Action Task Force (FATF) has added Lebanon to its list of ‘Jurisdictions under Increased Monitoring’, also known as the ‘Grey List’ of nations requiring increased monitoring of financial transactions, signaling potential challenges for the nation’s investment landscape and banking sector.

In May 2023, FATF had given Lebanon a one-year grace period to implement financial, monetary, and banking reforms before placing it under the ‘Grey List’.

The FATF, based in Paris, said that while Lebanon has made progress on certain recommended actions, it still faces ongoing requirements to implement further reforms.

The grey-listing could further complicate Lebanon’s ties with the international financial system and may deter foreign investments.

Elisa de Anda Madrazo of Mexico, which currently holds the rotating presidency of the FATF, acknowledged Lebanon’s severe current challenges. She said that grey-listing should not impede humanitarian relief efforts. “Channels of humanitarian aid remain open,” she said. Madrazo said that grey-listing is not punitive but rather part of a structured process aimed at helping countries strengthen their financial action plans.

Caretaker Prime Minister Najib Mikati said in a statement that “Lebanon’s inclusion on the FATF ‘Grey List’ was expected given the known circumstances that hindered the approval of the required financial legislation and reforms. Despite this, Lebanon has made progress in many of the measures recommended in the mutual evaluation report and implemented measures in its financial sector, by issuing the required circulars to banks and financial institutions, which means that Lebanon’s relations with correspondent banks will not be affected as a result of this classification.” He said: “Lebanon will continue to cooperate with FATF. It should be noted that this measure has been previously applied and is still being applied in many prominent Arab and foreign countries. It will be followed up according to the right procedures to reverse it."

The obligations required of Lebanon – as stated on FATF’s website are:
- Strengthening international cooperation mechanisms, as “improving the implementation of requests for mutual legal assistance, extradition, and asset recovery must be improved.” In this regard, FATF points to the weak response of the judicial authorities in Lebanon to requests for cooperation received from European courts regarding several suspicions of financial crimes, including those related to the former Governor of the Central Bank of Lebanon, Riad Salameh.

- Increasing investigations, prosecutions, and issuing rulings related to money laundering in line with the identified risks. This item once again refocuses on the weaknesses shown by the judicial authorities in combating financial crimes and pursuing suspicions of money laundering.

- Improving the recovery of illegally acquired assets and detecting and controlling illicit movements of currencies and precious metals across borders.

- Immediately implementing financial international sanctions, especially on non-financial professions and some non-banking financial institutions. In this regard, FATF alludes to the activities of the Al-Qard Al-Hassan Foundation, in addition to the activity of some money changers in the parallel market.

- Monitoring high-risk non-profit organizations, without disrupting or discouraging the legitimate activities of the organizations.

- Raising the level of understanding of risks among non-financial professions, and applying effective and proportionate sanctions to comply with the requirements of combating money laundering and terrorist financing. By reviewing the previous reports of FATF, it becomes clear that the “non-financial” professions are meant to be lawyers, financial auditing and certified accounting, in addition to commercial companies whose dealings circumvents international sanctions.

- Improving the use of financial information and financial intelligence by the competent authorities. This specifically refers to tax authorities, agencies authorized to combat smuggling, in addition to judicial authorities.

Lebanon was previously added on the FATF 'Grey List' in 2003 due to concerns around its financial system’s compliance with anti-money laundering and counter-terrorism financing standards. In 2016, the FATF removed Lebanon from this list after significant reforms were implemented, including new laws on anti-money laundering and terrorism financing, increased transparency for beneficial ownership of firms, and cooperation on freezing assets related to criminal activities.

Alongside Lebanon, the FATF also added Algeria, Angola, and Ivory Coast to its ‘Grey List’.

Senegal was removed from the list after notable progress, including enhancements in investigating and prosecuting money laundering tied to corruption.

Other countries on the ‘Grey List’ are:
Europe: Bulgaria, Croatia, and Monaco
Asia: Syria, Yemen, Philippines, and Vietnam
Africa: Burkina Faso, Cameroon, Congo, Mali, Mozambique, Namibia, Nigeria, South Africa, South Sudan, and Tanzania
Americas : Haiti and Venezuela

The FATF made no changes to its ‘Black List’, which includes Iran, Myanmar, and North Korea, designated as high-risk nations necessitating countermeasures to protect the global financial system from risks associated with money laundering and terrorism financing.

On February 2024, the United Arab Emirates (UAE) was removed from the ‘Grey List’ two years after being listed due to concerns about strategic deficiencies in its AML/CFT framework. This term, while not a sanction, raised significant concerns about reputational risk and actually hindered international financial transactions.