Lebanon added to global anti-money laundering watchdog's grey list

Decision by FATF places financial transactions in the country under increased scrutiny

Lebanon has been added to the global anti-money laundering watchdog's “grey list” of countries that are subject to increased monitoring of financial transactions.

The decision by the Financial Action Task Force comes as the war between Hezbollah and Israel has killed about 2,500 people and displaced about 1.4 million in Lebanon. The country has been struggling since 2019 with one of the worst economic crises in modern history, which has been blamed on decades of corruption and financial mismanagement by the country's elite.

Elisa de Anda Madrazo of Mexico, which currently holds the FATF's rotating presidency, said it was not a punitive measure and was part of the process of helping countries develop action plans to make improvements.

“Of course, we recognise the extremely grave situation that Lebanon is currently facing,” she said.

Lebanese caretaker Prime Minister Najib Mikati said the listing was “expected, considering the known circumstances, which hindered the establishment of the required legislation and financial reforms”.

“Lebanon will continue to co-operate” with the FATF and will follow up on the move to have it reversed, he added.

Ms Madrazo said “there was a degree of flexibility granted to Lebanon as it relates to the deadlines set in the action plan”.

“Lebanon's status on the grey list should not impede relief efforts. We are working to make sure that channels of humanitarian aid remain open,” she added.

The FATF noted that Lebanon had made some progress since May 2023, including “through issuing a circular for banks and financial institutions to establish a department dedicated to combating bribery and corruption-related crimes and guidance on politically exposed persons, while taking measures against unlicensed financial activity”.

Even before the year-long conflict broke out between Israel and the Lebanese armed group and political party Hezbollah, Lebanon was largely failing to implement reforms demanded by the International Monetary Fund in order to access a bailout.

The war has further hampered the reform process, and exacerbated the challenges that the country's ailing economy was struggling under.