Lebanon concerned by Hezbollah money-laundering

Officials worried by US group's allegations that Hezbollah, Iran using Lebanese banks for a money-laundering scheme.

Lebanon's Hezbollah leader Sayyed Hassan Nasrallah 370 (photo credit: REUTERS/Sharif Karim)
Lebanon's Hezbollah leader Sayyed Hassan Nasrallah 370
(photo credit: REUTERS/Sharif Karim)
Banking officials and residents in Beirut are concerned about a US pressure group’s report that Hezbollah and Iran are using Lebanon’s banks in a large money-laundering scheme, a leading Lebanese daily reported on Thursday.
New York-based United Against a Nuclear Iran (UANI) made public last month the results of a three-month, confidential investigation into the influence of Iran and Hezbollah on Lebanon’s banking system and sovereign bond market.
The group says Lebanon’s financial system – including Banque du Liban, the country’s central bank – is being used to funnel massive amounts of illicit cash for Hezbollah and its state sponsor, Iran.
“The Lebanese banking system provides the means by which Iran transacts funds transfers to evade the effects of sanctions and the growing international banking blockade against Iran, and allows the money transfers that support illicit weapons and other transactions, including with Syria,” UANI said.
Lebanese concerns about the report come after several groups – Austria’s Erste Sparinvest, Eaton Vance Investment Managers, Nord Est Asset Management, Ameriprise and Aktia Fund Management – divested from Lebanese sovereign debt securities.
Last week, UANI also called on Advanced Series Trust and its investment adviser Prudential Investments LLC to divest from Lebanese debt securities.
As-Safir noted that UANI’s campaign has also singled out Riad Salameh, governor of Banque du Liban.
In February, Salameh denied that there is any relationship between Banque du Liban and Iran’s central bank.
According to As-Safir, unnamed banking officials in Beirut said the report was “invective, insults, defamation and a pack of false allegations,” and showed a “partial understanding of the nature of the Lebanese economy.”
Lebanese officials are working to respond to the report, the paper said, including by preparing a detailed list of answers to questions raised in the report and explanations about Lebanon’s fiscal policies and public finance sector.
The paper noted that in June, US Secretary of State Hillary Clinton called Prime Minister Najib Mikati to stress her support for Lebanon’s stability and express confidence in the country’s financial institutions.
Citing unnamed financial sector sources, As-Safir said that Lebanon’s banks and financial institutions had pledged not to deal with any individuals named on US sanctions lists.
The same sources said that Lebanon’s ability to avoid any repercussions from the global economic turndown lies in its credibility as a financially stable sovereign.
As-Safir challenged UANI’s conclusions that one of the indicators that Hezbollah and Iran are using Lebanese banking system in a wide-scale money=laundering scheme is the discrepancy between the volume of financial transactions in Lebanon and the size of its economy.
The pressure group argue that despite Lebanon’s devastated economy, its currency and banking system operate as if they belonged within a more successful state.
Lebanese sovereign debt to GDP ratio is the fourth highest in the world, yet the country’s sovereign bonds and credit default swaps trade at low yields, UANI found, noting that the cost of Lebanese debt has decreased considerably since 2006, which the group said coincides with increased sanctions pressure against Iran.
As-Safir argues that these figures are not unusual and that the Lebanese banking sector has relied disproportionately on the outside world since World War I.
Regarding the impact of the campaign, As-Safir said the Lebanese banking system has always been vulnerable to US influence, but that vulnerability grew after the events of September 11, 2001, with the advent of new technological advances and tools to fight terrorism.
The campaign against Lebanon’s banking sector has received increased attention in Beirut following a recent report filed by the New York State Department of Financial Services, which alleged that the UK’s Standard Chartered bank schemed with the Iranian regime – and by extension its Lebanese proxy Hezbollah – to conceal more than $250 billion in illegal transactions.
On Wednesday, Beirut-based newspaper Al-Akhbar cited an unnamed Lebanese politician as saying that Washington was trying to increase pressure on major European banks to comply with US international sanctions against Iran.
“It is no secret among Lebanese bankers that Americans have become more aggressive in this area lately,” Al-Akhbar said, adding that banking sector officials believe the US believes the sanctions authorize Washington to use the tools it deems appropriate to address terrorist and security risks.
In response, UANI spokesman Nathan Carleton said that Lebanese banking officials should be concerned about the campaign, noting that several bondholders had divested from Lebanese sovereign debt.
“Lebanon’s Central Bank Governor Riad Salame has said absolutely nothing in response to UANI, and his silence has been deafening,” Carleton added. “He has notably been unable to answer even basic questions about Iran’s role in Lebanon’s banking system, including whether he agrees with Hezbollah’s leadership that its funding comes entirely from Iran.”
Regarding criticisms of UANI’s explanations over the Lebanese sovereign debt to GDP ratio, Carleton said there was “no innocent explanation as to why Lebanon’s numbers are so off-kilter.”
“While we are not privy to private conversations between US and Lebanese officials, we doubt that the US has truly been giving the Lebanese banking system a 100-percent clean bill of health. After all, the idea that Iran funnels money to terrorists through Lebanon is not new, and has been acknowledged by the US before,” Carleton said.