The Financial Action Task Force (FATF) has extended Lebanon’s deadline to meet its anti-money laundering and counter-terrorism financing (AML/CFT) obligations until the end of 2026. At that point, FATF will reassess Lebanon’s status on its list of jurisdictions under increased monitoring, commonly referred to as the “grey list,” and determine whether the country can avoid being downgraded to the high-risk jurisdictions list, or the “blacklist.”

The extension grants Lebanon more than a year to implement corrective measures, prompting Justice Minister Adel Nassar to establish a committee to oversee compliance efforts. The committee is chaired by lawyer Karim Daher and includes legal and financial experts tasked with addressing Lebanon’s shortcomings.

A Committee to Oversee Compliance

Nassar’s decision to form the committee has brought renewed attention to Lebanon’s AML/CFT commitments. The committee is chaired by lawyer Karim Daher and includes former judge Jean Tannous, Judge Rana Akoum, lawyer Lara Saade, lawyer Mohammad Mghabghab, and economic expert Mohammad Fahili.

According to the Justice Ministry, the committee’s mandate includes:

• Implementing corrective measures in line with FATF’s action plan to remove Lebanon from the grey list.
• Submitting a report to the Justice Minister within 45 days, starting from February 20, 2024. 

Lebanon’s Non-Compliance with FATF Requirements

Lawyer Karim Daher told Nidaa Al-Watan that compliance with FATF’s requirements is mandatory, not optional. He noted that FATF had granted Lebanon multiple grace periods to implement necessary reforms, but the country failed to meet its commitments, damaging its credibility with the international watchdog.

“The previous government did not implement the required reforms to prevent Lebanon from being placed on the grey list for two main reasons: first, it was a caretaker government, and second, it considered itself unaccountable to Parliament and not subject to oversight,” Daher explained.

Although the Lebanese Cabinet issued directives to relevant entities regarding the country’s AML/CFT obligations, these entities did not comply, and the government did not enforce corrective measures.

A report by SKY Research & Consulting and the Euro-Mediterranean Human Rights Monitor cited negligence as a key factor behind Lebanon’s grey-listing, despite multiple grace periods from FATF. The organization found that, during its last review, Lebanon had failed to implement 21 of the 46 corrective actions agreed upon with FATF. While 25 measures were partially addressed, Lebanon did not provide the additional information and clarifications FATF had requested by the August 26, 2024, deadline, leading to its grey-listing.

By the end of 2026, FATF will consider three possible outcomes for Lebanon:

1. Removing the country from the grey list.
2. Requesting further corrective actions.
3. Downgrading Lebanon to the high-risk jurisdictions list, or the “blacklist.”

The committee, which held its first meeting on February 25, will follow a structured approach:

• Phase One: Within 45 days, the committee must submit a report outlining immediate corrective actions, such as referring cases to the Financial Prosecutor’s Office. The Justice Minister will then take necessary measures.
• Phase Two: This phase involves drafting a compliance guide for entities responsible for implementing FATF requirements and training relevant stakeholders. Non-compliance will result in strict penalties.

Daher indicated that the committee’s recommendations would be submitted to the Justice Minister, who will oversee their implementation. Expected reforms include new legislation, digitalization of administrative processes, and increased transparency in the commercial registry, which currently allows legal entities to conceal their true beneficiaries.

Strengthening Oversight and Accountability

Public notaries, professional syndicates (such as those for accountants and lawyers), and financial institutions will be required to adhere to Know Your Customer (KYC) regulations, similar to banks. They must submit relevant information to oversight authorities, with FATF set to conduct an on-site assessment after the deadline to verify compliance.

Enforcement and Sanctions

Entities failing to comply with AML/CFT regulations will face disciplinary action. The government will impose penalties, including dismissals from official positions. Daher provided examples:

• Accountants and lawyers who fail to comply could be barred from registering companies or transactions in the commercial registry.
• Public notaries who violate regulations could be dismissed.
• Professional syndicates, such as the Bar Association, could disbar lawyers involved in money laundering activities.

Government Accountability and Legislative Gaps

Lebanon’s grey-listing has raised concerns about government accountability. While the Cabinet formally corresponded with relevant authorities, it did not enforce compliance. Daher argued that the government should have taken action against non-compliant entities or at least publicly identified them (“name and shame”).

Lebanon’s legal framework for AML/CFT dates back to Law No. 318 of 2001, which was later expanded by Law No. 44 in 2015 to enhance oversight by the Special Investigation Commission (SIC) at Lebanon’s Central Bank. However, financial crimes have evolved, with criminals now hiding behind legal entities such as shell companies and proxy employees, making enforcement more challenging.

The Challenge of Lebanon’s Cash Economy

Lebanon’s reliance on a cash-based economy further complicates AML/CFT efforts. Law No. 44 mandates compliance beyond the banking sector, covering real estate brokers, public notaries, accountants, and jewelers. Under the law, any professional receiving cash payments exceeding $10,000 must verify the payer’s identity, document the transaction, and report it to the SIC.

A Critical Moment for the Justice Ministry

With its expanded role in financial oversight, the Justice Ministry is now a key player in AML/CFT enforcement. It serves as a bridge between the banking sector’s Special Investigation Commission and the entities responsible for compliance. The ministry is also tasked with information exchange and asset recovery related to corruption.

By enforcing these measures, Lebanon aims to combat financial crime, enhance transparency, and regain the trust of the international community. Whether the country succeeds in meeting FATF’s requirements or faces further consequences remains to be seen.

This is an English adaptation of an Arabic article published by Nidaa Al-Watan.