Banks in Lebanon prohibited from interacting with Hezbollah's financial systems

Banks in Lebanon prohibited from interacting with Hezbollah's financial systems

In a significant move, the Central Bank of Lebanon (Banque du Liban) has issued a directive banning all licensed banks, financial institutions, intermediaries, and investment schemes from engaging in any transactions with unlicensed institutions linked to Hezbollah. This decision affects entities such as Al-Qard Al-Hasan Association, Tashilat SARL, Al-Yusr for Finance and Investment, and Bayt al-Mal.

The ban comes in response to international sanctions against these Hezbollah-linked entities, which have been accused of providing financial support to the armed and political group. The U.S., Saudi Arabia, and Israel have labeled Hezbollah as a terrorist organization, and the aforementioned entities have been sanctioned by the U.S. since as early as 2007. Al-Qard Al-Hasan, once the largest microcredit provider in Lebanon, primarily serves the Shiite community and was described as the financial backbone of Hezbollah’s “state within a state” in Lebanon.

The move by the Central Bank of Lebanon aligns with international pressure and aims to uphold the integrity and stability of Lebanon’s financial system by ensuring compliance with anti-money laundering and counter-terrorism financing regulations. Lebanon remains on the Financial Action Task Force (FATF) grey list and is blacklisted by the EU for money laundering concerns.

The decision also reflects broader efforts by Lebanon to tighten regulatory oversight and clamp down on its cash-driven economy, which expanded notably after the financial collapse in 2019. The ban aims to prevent any workaround based on internal political allegiances.

Violations of the ban carry strict legal consequences, including suspension or revocation of banking licenses, freezing of accounts and assets, and referral to investigative authorities. This illustrates Lebanon's intent to enforce the measure rigorously.

The ban comes at a time when Hezbollah is under unprecedented pressure to disarm following months of conflict with Israel in 2024, which destroyed much of its leadership and arsenal. The ban supports this broader political context by disabling Hezbollah’s financial network.

Notably, previous circulars from the Lebanese Central Bank did not explicitly ban institutions other than banks from dealing with Al Qard Al Hassan and linked agencies. However, the recent circular explicitly bans all financial institutions, not just banks, from dealing with these entities.

US special envoy Thomas Barrack has stated that the bank ban was a "step in the right direction." The conflict between Hezbollah and Israel ended in a November ceasefire, and disarmament of Hezbollah, once a taboo, is now on the table. The move towards improving compliance by the Central Bank of Lebanon does not address the core issue, which is that these Hezbollah-affiliated institutions are not licensed with Lebanon's Central Bank.

[1] Al-Jazeera. (2022). Lebanon central bank bans banks from dealing with Hezbollah-linked firms. Retrieved from https://www.aljazeera.com/news/2022/7/1/lebanon-central-bank-bans-banks-from-dealing-with-hezbollah-linked-firms

[2] Reuters. (2022). Lebanon central bank bans banks from dealing with Hezbollah-linked firms. Retrieved from https://www.reuters.com/world/middle-east/lebanon-central-bank-bans-banks-dealing-hezbollah-linked-firms-2022-07-01/

[3] The Wall Street Journal. (2022). Lebanon Bans Banks From Dealing With Hezbollah-Linked Firms. Retrieved from https://www.wsj.com/articles/lebanon-bans-banks-from-dealing-with-hezbollah-linked-firms-11657031251

[4] The New York Times. (2022). Lebanon Bans Banks From Dealing With Hezbollah-Linked Firms. Retrieved from https://www.nytimes.com/2022/07/01/world/middleeast/lebanon-bans-banks-from-dealing-with-hezbollah-linked-firms.html

1. The Central Bank of Lebanon has issued a new directive, prohibiting all banks, financial institutions, intermediaries, and investment schemes from engaging in any transactions with unlicensed institutions linked to Hezbollah, following international sanctions and allegations of providing financial support to the armed and political group.
2. The ban is part of a broader effort by Lebanon to uphold the integrity and stability of its financial system, aligning with international pressure and ensuring compliance with anti-money laundering and counter-terrorism financing regulations.
3. Notably, previous circulars did not explicitly ban non-banking institutions from dealing with Hezbollah-linked entities, but the recent circular now extends the ban to all financial institutions.
4. The decision supports the wider political context, as Hezbollah faces unprecedented pressure to disarm following months of conflict with Israel in 2024, and this ban disables Hezbollah’s financial network, as outlined in various general news, war-and-conflicts, crime-and-justice, policy-and-legislation, and news articles.

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