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3. Combating Paramilitary Financing: Key to Keeping Lebanon Off the Gray List

Lebanon's inclusion on the Financial Action Task Force (FATF) gray list can largely be attributed to the lack of cooperation from Lebanese authorities in combating the financing of paramilitary groups, particularly Hezbollah, as well as other organizations like Hamas and the Islamic Jihad Movement.

The failure to address this issue was largely due to Hezbollah’s significant influence, which allowed the group to operate with relative freedom across various domains, especially in securing funding. This included direct cash deliveries to Hezbollah, either from Tehran through Beirut Rafic Hariri Airport, via a route from Tehran to Istanbul and then to Beirut, or by land through Syria into Lebanon. However, the recent conflict with Israel has notably reduced the flow of Iranian funds, and air shipments were the first to be affected, as security measures at the airport now prevent such transfers. Additionally, the ban on Iranian flights landing in Beirut has had a major impact on the movement of funds. On the ground, the collapse of the Syrian regime has further disrupted these financial channels.

Despite these challenges, attempts to smuggle funds to armed groups in Lebanon, particularly Hezbollah, persist. Smuggling operations, whether by air or land, remain a risk due to the numerous available routes. However, Lebanese concerned authorities, particularly customs, have heightened vigilance at the airport, ports and land crossings. Any individual entering Lebanon with more than $10,000 must declare the amount, with failure to do so resulting in confiscation and legal action.

Sources closely monitoring the issue have emphasized that the stringent measures to prevent the inflow of large sums of cash into Lebanon are crucial in the fight against money laundering and terrorism financing. Lebanon remains committed to this process under legislation passed by the Lebanese Parliament. Moreover, these strict controls help curb the cash-based and parallel economies, which have long posed risks to the legitimate economy, state treasury and financial markets.

These sources expressed hope that Lebanon will continue its efforts, as these actions have generated positive responses from international financial institutions, donor countries and organizations. This signals that the Lebanese State is serious about reclaiming its sovereignty and ensuring its financial system meets international standards. Despite the challenges they face, Lebanese banks are already in compliance with these standards. However, it remains essential for the state to fulfill its obligations to prevent Lebanon from becoming a conduit for illicit funds with questionable origins and purposes. Additionally, the judiciary must take action to prosecute those involved in such activities. Should significant progress be made, Lebanon may have the opportunity to reconsider its position on the FATF gray list in either June or October of the coming year.