Lebanon remains on the Financial Action Task Force’s (FATF) grey list after the global financial crime watchdog removed four countries from the list in its latest review, underscoring the work still required by Beirut to address weaknesses in its efforts to combat money laundering and terrorist financing.

The FATF announced on Friday, that Bulgaria, the Democratic Republic of the Congo, Côte d’Ivoire and Monaco had been removed from its list of jurisdictions under increased monitoring, bringing the total number of countries on the list down from 22 to 18. No new countries were added.

Lebanon, which has been under increased monitoring since October 2024, remains among the countries required to implement reforms under an agreed action plan. Its progress was reviewed during the latest assessment, but the organization has not yet deemed the country’s efforts sufficient to remove it from the list.

In its updated assessment, the FATF acknowledged that Lebanon had taken steps to strengthen its anti-money laundering and counter-terrorist financing framework, despite the country’s difficult social, economic and security conditions.

These measures include issuing instructions on the implementation of targeted financial sanctions without delay, as well as providing specialized guidance and training to financial institutions and designated non-financial businesses and professions that have a limited understanding of their obligations in this area.

However, the organization said Lebanon must continue working to address a number of strategic deficiencies through a 10-point action plan.

The outstanding requirements include assessing specific money laundering and terrorist financing risks identified in the country’s mutual evaluation report and ensuring that appropriate policies and measures are in place to mitigate them.

Lebanon must also strengthen mechanisms for the timely and effective handling of requests for mutual legal assistance, extradition and asset recovery, while improving the understanding of money laundering and terrorist financing risks among designated non-financial businesses and professions. The FATF called for effective, proportionate and dissuasive penalties for breaches of anti-money laundering and counter-terrorist financing obligations.

Other priorities include ensuring that beneficial ownership information is accurate and up to date, and that adequate sanctions and risk-mitigation measures are in place for legal entities.

The FATF also called on Lebanese authorities to make greater use of financial intelligence and reports produced by the country’s Financial Intelligence Unit, while demonstrating a sustained increase in money laundering investigations, prosecutions and court rulings in line with the country’s risk profile.

The action plan further requires Lebanon to improve asset recovery mechanisms and identify and seize illicit cross-border movements of currency, precious metals and stones.

On terrorist financing, the country must pursue investigations and share information with foreign partners, while strengthening the implementation of targeted financial sanctions without delay, particularly among designated non-financial businesses and certain non-bank financial institutions.

The final requirement concerns the monitoring of high-risk non-profit organizations through targeted, risk-based measures designed to prevent their potential abuse for terrorist financing without disrupting or discouraging legitimate activities.

Economic and financial implications

The FATF’s decision to keep Lebanon on the grey list carries significant implications for a country seeking to restore confidence in its financial system and rebuild its international banking relationships.

Grey-listing does not automatically trigger sanctions. However, it can lead banks and other financial institutions abroad to apply greater scrutiny to transactions involving countries under increased monitoring, raising compliance costs and potentially affecting investment and cross-border capital flows.

Reuters reported that the removal of the four countries was based on their progress in addressing strategic deficiencies in their systems for combating money laundering, terrorist financing and the financing of proliferation.

The Democratic Republic of the Congo’s finance minister said the decision was expected to reduce the cost and friction of cross-border transactions for banks, businesses and citizens, while supporting correspondent banking relationships. Monaco’s minister of state, meanwhile, described its removal as recognition of more than two years of coordinated work by state authorities.

For Lebanon, continued inclusion on the list means that it has yet to secure the same recognition of progress. Addressing the remaining requirements will be important to improving international confidence in its financial oversight and strengthening its ability to engage with the global banking system.

The FATF has, however, clarified that jurisdictions under increased monitoring should not automatically be subjected to enhanced due diligence solely because of their listing. Its standards call for a risk-based approach rather than the blanket withdrawal of financial services from entire categories of customers.

The organization also stressed that measures taken by countries should not disrupt or discourage humanitarian assistance, legitimate activities by non-profit organizations or remittance flows.

A wider international review

The October plenary, held in Paris from October 28 to 30, was the first under the FATF presidency of Giles Thomson, whose term runs from July 2026 to June 2028.

While four countries were removed from the grey list, the separate list of high-risk jurisdictions subject to a call for action remained unchanged. Iran, Myanmar and North Korea continue to be included.

The FATF also expressed significant concern over Vietnam’s slow progress in implementing its action plan, warning that it would consider further steps if the country failed to make tangible improvements by its next plenary meeting in February 2027.

The next FATF plenary and working-group meetings are scheduled for February 22-26, 2027.