Financial crime watchdog sources indicate Lebanon faces grey-listing

According to three sources familiar with the matter who spoke to Reuters, Lebanon is expected to be added to a “grey list” of countries facing increased scrutiny for their inadequate measures in preventing money laundering and terrorism financing.

Inclusion in the list would deal another significant blow to a country grappling with financial turmoil since 2019 and facing challenges in finalizing a deal with the International Monetary Fund.

In recent events, the local pound has significantly depreciated by over 98%, resulting in a vast majority of the population facing the harsh realities of poverty. Adding to this concern, diplomats have been raising alarms for months about the potential rise of illicit financial activities within the cash-driven economy.

The Middle East and North Africa section of the Financial Action Task Force, a financial crime watchdog, has carried out a preliminary evaluation of Lebanon’s economy, which the sources said it will share with member states this week in Bahrain.

The cumulative score of that evaluation puts Lebanon “one mark over the threshold to be grey-listed,” said a diplomatic source who had seen a copy of the preliminary report.

According to a draft seen by Reuters, Lebanon was scored as only partially compliant in several categories, including anti-money laundering measures, transparency on beneficial ownership of firms and mutual legal assistance in asset freezing and confiscation.

The FATF declined to comment on the report or the score ahead of its publication.

“Lebanon is pitching for more leniency, and trying to have an improved score on one of the categories so it is no longer within the grey-listing zone,” the diplomatic source said.

Lebanon’s deputy prime minister Saade Chami, who is heading the country’s talks with the IMF, told Reuters he had not seen the draft report and declined to comment on the impact it might have on talks with the lender of last resort.

A financial source familiar with the matter said the draft gave Lebanon a score worthy of grey-listing. “Authorities are trying very hard to stop that from happening,” the source said.

A second diplomatic source familiar with the matter said the draft document was already lenient, given the collapsing state of the Lebanese economy. “Anything but greylisting would be a scandal,” the source said.

Reporting by Reuters