One of the working meetings of the FATF in October 2024. Photo taken from the FATF Facebook page.
Eight years after being removed from the Financial Action Task Force (FATF) “gray list”—an organization that sets international standards for combating money laundering and terrorism financing—crisis-stricken Lebanon, now dragged into a year-long conflict with Israel, finds itself back on the list and placed under “enhanced surveillance.”
This decision was announced at an FATF press conference in Paris following one of its three annual plenary meetings, which also take place in February and June, and concluded a week of regular working meetings held for the first time under the leadership of Elisa de Anda Madrazo, who has presided over the organization since July 1st, with a two-year term. Alongside Lebanon, Algeria, Angola, and Côte d'Ivoire were added to the list of countries under “enhanced surveillance.”
Lebanon had previously been removed from the list in 2016 after a 15-year period, largely due to adopting a series of laws that strengthened the powers of its Special Investigation Commission (SIC) in investigating financial crimes. However, Lebanon ultimately failed to benefit from the 18-month grace period granted following a negative assessment in 2022, three years into the country's ongoing severe economic crisis.
'Removing Lebanon from the gray list as quickly as possible'
Some observers hoped that the grace period would be extended as Lebanon faces intensified Israeli military operations that, according to UNDP, are beginning to cause the national economy to collapse.
For a country to be removed from “enhanced surveillance,” it must, according to the FATF, “implement all, or the majority, of the elements of its action plan.” Lebanon's plan was created by the FATF and the SIC. Once the FATF deems that the actions have been implemented, it sends experts on-site to confirm that all necessary reforms are in place. If this is successful, the FATF may decide to remove the country from the gray list during its next plenary meeting.
In this regard, Karim Daher, a tax lawyer and member of the Lebanese Association for Taxpayer Rights and Information (Aldic), believes that “all means at Lebanon's disposal should be implemented to get off this gray list as quickly as possible.” A financial source informed Reuters that, in consideration of the current war, the FATF has extended Lebanon’s deadline for addressing the issues that led to its gray-listing from 2025 to 2026, especially regarding concerns about terrorism financing and lack of judicial independence.
In December 2023, in an interim review, FATF experts considered most of the measures Lebanon had taken to comply with its requests to be acceptable. However, they also demanded that more efforts be made, particularly in international cooperation and in identifying the “real” beneficiaries of transactions or companies, in a country where banking secrecy still exists despite reforms passed in recent years. “The lack of real-time cross-checking among the different institutions collecting data on beneficial owners in various transactions or entities prevents verification of the real identity of these beneficiaries,” Daher noted.
This area remains a significant weakness for Lebanon. But since then, “not much has been done,” commented an anonymous expert. “Many economic actors in Lebanon, including notaries, lawyers, accountants, real estate brokers, and jewelers, have not met FATF's requirements, despite repeated reminders from the Cabinet,” they explained. “All these actors knew this would result in Lebanon’s re-listing on the gray list.”
According to Mohammad Almoghabat, regional director of the Euro-Mediterranean Human Rights Monitor, which specializes in governance and anti-money laundering issues, placing Lebanon under “enhanced surveillance” could be “a positive measure.” “This may push the Lebanese authorities to act quickly and implement necessary reforms,” he noted.
Ending relations with Lebanese banks?
Being on the gray list could prompt some or all of the foreign correspondent banks still dealing with Lebanon to sever ties with the Lebanese banking sector. This aligns with a “de-risking strategy” to minimize additional costs linked to stricter verification processes necessary to ensure compliance in each transaction.
These stricter processes would also add administrative burdens, intended to enhance due diligence (background checks on bank clients), and might dissuade some international actors from engaging with Lebanese clients. According to Mohammad Almoghabat, some of these actors may choose to pass the costs of these complications onto the prices of goods sold in Lebanon.
He explained in July that being placed on the gray list could impact, in the short term, the decisions of individuals and companies working with Lebanon. “De-risking could, therefore, have effects on industry, import-export, and real estate. Some actors might decide to reduce or delay their commitments in Lebanon, or even withdraw from the country,” he said. “However, this remains a case-by-case situation and cannot be generalized to all economic actors.”
