Three informed sources told Reuters that the Financial Action Task Force (FATF) is likely to place Lebanon on its "grey list" of countries under increased scrutiny due to unsatisfactory practices, aiming to combat money laundering and terrorist financing. Inclusion on the list would represent another significant blow to a country suffering from financial collapse since 2019 and struggling to reach an agreement with the International Monetary Fund (IMF). The Lebanese pound has lost over 98% of its value, plunging the majority of the population into poverty.
Diplomats have expressed concern for months that an economy heavily reliant on cash transactions may conceal more illicit financial flows. The Middle East and North Africa division of the FATF, which monitors financial crimes, conducted a preliminary assessment of Lebanon's economy, and member countries will review it this week in Bahrain. According to a diplomatic source who has seen a copy of the preliminary report, the cumulative result of this assessment places Lebanon "one mark above the grey list threshold."
According to a draft reviewed by Reuters, Lebanon was rated as partially compliant with standards in several categories, including anti-money laundering measures, transparency regarding the beneficial ownership of companies, and mutual legal assistance regarding asset freezing and seizure. The FATF declined to comment on the report or the assessment prior to their publication.
The diplomatic source stated that "Lebanon is seeking more leniency and trying to achieve a better result in one of the categories to avoid falling into the grey list area." Ghassan Hasbani, Deputy Prime Minister in the caretaker government and head of the country's negotiations with the IMF, stated he had not seen the draft report and refrained from commenting on its potential impact on talks with the Fund.
A financial source who is knowledgeable about the matter indicated that the draft gave Lebanon a score justifying its inclusion on the grey list, saying, "Authorities are trying desperately to prevent this." Another informed diplomatic source noted that the draft report was already lenient given the collapse of the Lebanese economy, adding, "Anything other than the grey list would be a scandal."
The two diplomatic sources further stated that the compliance unit in the special investigation commission of the Central Bank of Lebanon had been pressuring FATF member states to modify the outcome. The compliance unit did not respond to an emailed request for comment.
The IMF concluded in a document from 2021 that a country’s inclusion on the FATF grey list could disrupt capital flows, with banks potentially withdrawing from dealings with clients in high-risk countries to reduce compliance costs. Such inclusion also risks harming the country's reputation, affecting credit rating adjustments, complicating access to international funding, and increasing transaction costs.
In Lebanon's case, the financial collapse has already severely constrained banking transactions, and many institutions have severed ties with the country. Inclusion on the list would serve as an indictment of the Lebanese financial system at a time of heightened crises, with the country making slow progress on essential reforms required to finalize an agreement with the IMF.
