Countries/Jurisdictions of Primary Concern - Lebanon
Lebanon is a financial hub for banking activities in the Middle East and Eastern Mediterranean and has one of the more sophisticated banking sectors in the region. Lebanon faces money laundering and terrorism financing challenges. Domestically, there is a black market for cigarettes, cars, counterfeit consumer goods, pirated software, CDs, and DVDs. Nevertheless, the sale of these goods does not generate significant proceeds that are laundered through the formal banking system. In addition, the domestic illicit narcotics trade is not a principal source of laundered proceeds. Lebanon has a substantial influx of both formal and informal remittances from expatriate workers and family members, estimated by the World Bank at approximately $7.5 billion annually over the last six years. Recent statistics demonstrate that embezzlement of private funds operations, which includes cybercrime money laundering, increased in 2015.
A number of exchange houses are reportedly used to facilitate money laundering and terrorism financing, including by Hizballah, which the United States has designated as a terrorist organization, though the Government of Lebanon does not recognize this designation. Lebanese expatriates in Africa, the Gulf, and South America have established financial systems outside the formal financial sector, and some are reportedly involved in trade-based money laundering (TBML) schemes. International trade is also used to provide counter-valuation between Lebanese hawaladars.
The use of bitcoins is prohibited in Lebanon. Although offshore banking and trust and insurance companies are not permitted in Lebanon, the government has enacted regulations regarding the activities of offshore companies and transactions conducted outside Lebanon or in the Lebanese Customs Free Zone. Offshore companies can issue bearer shares. There are also two free trade zones (FTZ) operating in Lebanon: the Port of Beirut and the Port of Tripoli. FTZs fall under the supervision of the Customs Authority.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: //2009-2017.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: List approach
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO
KYC covered entities: Banks, financial and lending institutions, money dealers, financial brokerage firms, leasing companies, mutual funds, insurance companies, real estate developers, promotion and sales companies, high-value goods merchants, and money remitters
Number of STRs received and time frame: 189: January 1 – October 31, 2015
Number of CTRs received and time frame: 55: January 1 – October 31, 2015
STR covered entities: Banks, lending institutions, money dealers, financial brokerage firms, leasing companies, mutual funds, insurance companies, real estate developers, promotion and sales companies, casinos, money remitters, auditors appointed at financial institutions, high-value goods merchants, public notaries, attorneys, and accounts
money laundering criminal Prosecutions/convictions:
Prosecutions: 12: January - October, 2015
Records exchange mechanism:
With U.S.: MLAT: NO Other mechanism: YES
With other governments/jurisdictions: YES
Lebanon is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.menafatf.org/MER/MutualEvaluationReportoftheLebaneseRepublic-English.pdf
Enforcement and implementation issues and comments:
On November 13, 2015, Parliament endorsed laws intended to strengthen Lebanon’s AML/CFT regime. These include amendments to the existing AML law (Law 318/2001) to further widen categories of reporting entities to include public notaries, attorneys, and accountants. The list of predicate offenses to charge money laundering has also been increased. Legislation now allows confiscation of assets and sharing of confiscated assets with concerned countries. New Law 42/215, Declaring the Cross-Border Transportation of Money, imposes requirements to declare both inbound and outbound cash transportation of amounts exceeding $15,000 or its equivalent in any other currency. This is applicable to any means of transporting the currency, whether on your person, in a suitcase, by post, or any means of shipment. There also is a new law on the exchange of tax information (Law 43/2015), which authorizes the Ministry of Finance to join bilateral and multilateral agreements to exchange information related to tax evasion and tax fraud.
The Special Investigation Commission (SIC), Lebanon’s financial intelligence unit, publishes annual statistics on money laundering, breaking them down by type of offense. Lebanon’s Internal Security Forces (ISF) Cybercrime and Intellectual Property Unit tracked 76 cases of hackers located in Lebanon and abroad who embezzled funds from local depositors and transferred the funds to bank accounts located outside Lebanon.
On June 30, 2015, the Banque du Liban, the Central Bank, issued Intermediate Circular No. 393, amending Basic Circular No. 69, strengthening AML/CFT controls on money remitters. The Banque du Liban also has issued regulations to regulate exchange houses.
The SIC has confirmed reports suggesting local commercial banks and financial institutions have implemented regulatory measures, including enhanced due diligence regarding high risk customers and/or closure of accounts that represent unacceptable risks. As a result there are no longer currency transactions related to international narcotics trafficking that include significant amounts of U.S. currency, currency derived from illegal drug sales in the U.S., or illegal drug sales that otherwise significantly affect the U.S.
Despite no requirement to file currency transaction reports (CTRs) with the SIC, 55 such reports were filed voluntarily between January and October 2015.
The SIC froze a number of accounts on suspicion of money laundering; however, the SIC does not publicly disclose figures of total amounts frozen. Although the number of filed STRs and subsequent money laundering investigations coordinated by the SIC has increased steadily over the years, convictions are still lacking. The U.S. Department of Justice has six pending legal assistance requests with the Government of Lebanon. Lebanon has been slow to react to the requests.
The Lebanese Customs Authority must inform the SIC of suspected TBML or terrorist financing; however, alleged high levels of corruption within Customs make this problematic. Lebanon is a participant country of the Kimberley Process, and trade in rough diamonds is governed by law number 645. However, there have been persistent reports of smuggling and the mis-invoicing and mis-classification of diamonds. Another unaddressed vulnerability is the trading of bearer shares of unlisted companies.
In the first 10 months of 2015, the SIC sent 25 referrals to the Office of the Prosecutor General. The ISF also received 48 allegations of money laundering from Interpol and arrested three persons. The ISF sent five suspected money laundering cases to the SIC for investigation. Lebanese law enforcement entities often do not coordinate activities. The government has started training joint task forces including members of relevant agencies, such as Customs, the ISF, the SIC, and the judiciary. Cooperation between the SIC and local enforcement authorities, especially in terrorism financing cases, has increased; several training initiatives were undertaken in 2015 to enhance such cooperation. Lebanon could also benefit from increased cooperation among local and international law enforcement organizations to combat money laundering and terrorism financing.
Individuals in Lebanon are engaged in TBML by utilizing vehicles as the commodity to legitimize drug proceeds linked to Hizballah. U.S. law enforcement identified money wires coming into the United States from Jordanian and Lebanese entities to various domestic vehicle dealerships. These funds are used to purchase vehicles subsequently exported to Lebanon and Jordan. In some instances, there are weapons secreted within the exported vehicles. The transactions that occur in the United States appear to be legitimate, but the ultimate destination of the vehicles is unknown and the proceeds may be directed back to Hizballah in Lebanon.
Lebanon should strengthen its overall efforts to disrupt and dismantle money laundering and terrorist financing activities, including those carried out by Hizballah. Lebanon should enforce its new cross-border currency reporting requirements, fully implement its new laws and directives, and take action to immobilize bearer shares. The government should continue its efforts to achieve better coordination and efficiency in the investigation of complex financial crimes by its various law enforcement and investigative agencies.