Lebanon added to money laundering “grey list”, what are the implications?

ALBAWABA – Lebanon has been added to the ‘grey list’ of countries subject to enhanced supervision of financial transactions by the Financial Action Task Force (FATF), a 40-member global anti-money laundering agency headquartered in Paris, according to Reuters.

The aim of this status, which was declared on Friday, is to encourage Lebanon to improve its financial regulatory systems so that it remains in line with global standards while increasing the level of supervision.
The FATF highlighted Lebanon’s financial problems, especially with regard to anti-money laundering policies and counter-terrorism financing structures.

Lebanon is expected to be added to the Financial Action Task Force’s gray list. This comes at a time when the country is facing several crises, including economic hardships.

This will put even more pressure on a population that is already highly dependent on external… pic.twitter.com/NgzN4U7Q1l

— Omar (@lebaneseguy43) October 25, 2024

As the country faces additional tensions due to a protracted economic crisis and rising regional tensions, these issues, in addition to a lack of judicial independence, need to be further addressed, the watchdog said.

FATF President Elisa de Anda Madrazo emphasized that this gray list is a motion to help Lebanon implement the required changes, rather than a punitive measure. She acknowledged the difficult situation in Lebanon and said the heightened surveillance would have no impact on humanitarian aid operations, Aljazeera reported.

In response, Lebanon’s interim Prime Minister Najib Mikati said the gray list was expected due to delays in implementing key financial reforms and laws. He confirmed that ties with foreign correspondent banks will remain stable and assured that Lebanon is committed to implementing FATF recommendations.

The conflict led the FATF to give Lebanon until 2026, instead of 2025, to resolve challenges that led to the gray list, such as concerns over “terrorist financing” and a lack of judicial independence, a source said earlier Friday to Reuters.

However, the gray list could have an impact on the economic environment in Lebanon by discouraging foreign investment and damaging the international position of the country’s banking sector.

Since 2019, Lebanon has been grappling with an economic crisis that has damaged the banking sector and stalled important reforms. Lebanese banks could find it difficult to maintain their reputation in the global financial system due to the gray list, which could further weaken investor confidence.