Officially Lebanon is Put on the Grey List After Failure to Implement the Required Actions

On Friday October 25^th, 2024, Lebanon was officially listed on the Paris-based Financial Action Task Force (FATF) Grey List for not implementing the required actions to combat money laundering and terrorist financing even though it was given an additional year to implement them (details about the findings and required actions are present in pages 3 – 7 in the spotlight “Can Lebanon Evade FATF Grey List Again?” published on March 28^th, 2024). However, Elisa de Anda Madrazo of Mexico who currently holds the organization’s rotating Presidency stated “Of course, we recognize the extremely grave situation that Lebanon is currently facing and Lebanon’s being put in the grey list should not impede relief efforts and we are working to ensure that channels of humanitarian aid remain open”. Therefore, the promised $1 billion in aid that were decided in the Paris meeting last week, out of which $200 million will be given to the Lebanese army, should not be affected. Moreover, Madrazo stated that “there was a degree of flexibility granted to Lebanon as it relates to the deadlines set in the action plan”; despite that, Lebanese officials were not able to implement the required actions as they were figuring out a way to elect a new president in the past two years, and arguing whether the caretaking government and the parliament should meet and take decisions or not in the absence of a president.

As Lebanon is officially listed on the grey list, below are the main consequences of listing a country on FATF grey list:

• Lowered attractiveness of foreign direct investments
• Increased cost for Lebanese companies in doing business with foreign counter parties due to increased due diligence
• Payment delays affecting trade and supply chain
• Increased restrictions in countries with rigid measures on cross-jurisdictional operation to and from countries listed on grey list

The above consequences will add insult to injury on the Lebanese population since Lebanon needs direct foreign investments to improve the Lebanese economy after the economic and financial crisis that blew in 2019.  Currently, and after the escalation of the war, direct foreign investments and other financial flows became more urgent and are required as soon as the cease fire decision is implemented. Without these investments, the villages that were destroyed cannot be rebuilt. Moreover, due to the increased due diligence by the correspondent banks, the latter might charge the Lebanese banks higher commissions, therefore exports costs will increase and these increases will be passed to the consumer.

In conclusion, the inclusion in the grey list should be an alert for Lebanese officials to take serious actions to implement the required actions; otherwise, there is a possibility for Lebanon to join Iran, Myanmar, and North Korea in the blacklist.

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