Lebanon is a founding member of the Middle East and North Africa Financial Action Task Force (MENAFATF) which is an associate member of the Financial Action Task Force (FATF). Members of the MENAFATF signed a Memorandum of Understanding in 2004, whereby they pledged to adopt and implement the FATF's recommendations. Moreover, in its 2006 annual report, the MENAFATF states that all accession countries must adopt the FATF Forty Recommendations and Nine Special Recommendations. However, apart from these statements from the MENAFATF, there is little information addressing Lebanon's actual compliance with the FATF's recommendations. As noted in the 2007 U.S. Department of State (DoS) International Narcotics Control Strategy Report, Lebanon was removed from the list of Non-Cooperative Countries and Territories in 2002, and has since made progress in implementing the FATF's recommendations on anti-money laundering (AML) and combating the financing of terrorism (CFT). According to the same report, Lebanese laws provide for the confiscation, freezing, and seizing of proceeds of crime. The Special Investigation Commission (SIC), Lebanon's Financial Intelligence Unit (FIU), implemented a Remote Access Communication system in 2005 to improve the exchange of information on AML/CFT issues. This resulted in an increased number of suspicious transaction reports. Since 2006, per the same report, the SIC has been working on a self-assessment to further improve its compliance with the FATF recommendations in light of a possible assessment by international bodies by late 2007 or early 2008. According to the 2007 U.S. DoS report, shortcomings remain, however, with regard to prosecutions and convictions. The report recommends improving cooperation between financial investigators, the police, and customs; enforcing cross-border currency reporting; and becoming a party to the United Nations (UN) Convention against Corruption as well as the UN International Convention for the Suppression of the Financing of Terrorism.

General Overview

According to the 2007 U.S. Department of State (DoS) International Narcotics Control Strategy Report, Lebanon has made progress in implementing the Financial Action Task Force (FATF) Forty Recommendations and Nine Special Recommendations on anti-money laundering (AML) and combating the financing of terrorism (CFT), and was removed from the list of Non-Cooperative Countries & Territories (NCCTs) in 2002. However, as noted in the same report, prosecutions and convictions are still lacking. The U.S. DoS recommends improving cooperation between financial investigators, the police, and customs; enforcing cross-border currency reporting; and becoming a party to the UN Convention against Corruption as well as the UN International Convention for the Suppression of the Financing of Terrorism.

On April 20, 2001, the Lebanese Parliament passed Law No. 318 on Fighting Money Laundering, which criminalizes money laundering, defines fines and sanctions, and creates a framework for lifting banking secrecy, as noted in the 2007 U.S. DoS report. Lebanon also adopted Law No. 547, criminalizing funds related to CFT, acts of public/private funds theft, and counterfeiting, as well as Law No. 553, providing an extension to the Penal Code on terrorist financing. According to the 2007 U.S. DoS report, Lebanese law provides for the confiscation, freezing, and seizing of proceeds of crime. The Special Investigation Commission (SIC) - Lebanon's Financial Intelligence Unit (FIU) - was established under Law No. 318 as an independent legal entity with judicial powers. The SIC, as noted on its website, "receives, analyzes, investigates suspicious transaction reports (STRs), and ensures compliance of banks, financial institutions, and other reporting entities with the AML/CFT regulations." It is the sole authority in Lebanon with the exclusive right to lift banking secrecy. According to the 2007 U.S. DoS report, an SIC Remote Access Communication (SRAC) system was implemented in 2005 to improve the exchange of information on AML/CFT issues, which resulted in an increase in the number of STRs. As of 2006, the SIC has signed 15 Memoranda of Understanding (MoUs) with other FIUs, and has been working on a self-assessment to further improve its compliance with FATF Recommendations in light of a possible assessment by international bodies by late 2007 or early 2008.

During 2003, Lebanon joined the Egmont Group and increased inter-agency cooperation, notably with customs and the police, according to the 2007 U.S. DoS report. On November 30, 2004, according to the same report, Lebanon was elected as head of the Middle East and North Africa MENAFATF, which promotes AML/CFT measures in the MENA region. Furthermore, the fourteen founding member countries of MENAFATF signed a MoU where they "pledge to adopt, and implement the objectives of the FATF recommendations." According to the 2006 MENAFATF Second Annual Report published in 2007, one of the main criteria for MENAFATF membership accession is the adoption of the FATF Forty Recommendations and Nine Special Recommendations on AML/CFT. As stated in the 2007 U.S. DoS report, Lebanon ratified the 1988 UN Drug Convention, with reservations on bank secrecy, and adopted the 2000 UN Convention against Transnational Organized Crime. On the other hand, Lebanon is not a party of the 1999 UN International Convention for the Suppression of the Financing of Terrorism, or the 2003 UN Convention against Corruption. A European Union -Lebanon Association Agreement was adopted in 2002, and entered into force on April 1, 2006 to promote the development of Lebanon. Finally, in 2006, Lebanon launched a U.S.-MENA Private Sector Dialogue.

According to a 2007 U.S. DoS report, laundered criminal proceeds come primarily from domestic criminal activity. However, the smuggling of cigarettes and pirated software and the illicit narcotics trade are not principal sources of money laundering proceeds. During 2006, there were two cases of bank fraud, and the SIC investigated 118 cases related to AML/CFT activities, as stated in the 2007 U.S. DoS report.

The Principles

1. Legal Systems and Related Institutional Measures

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On April 20, 2001, the Lebanese Parliament passed Law No. 318 on Fighting Money Laundering, which criminalizes money laundering, defines fines and sanctions, and creates a framework for lifting banking secrecy, as noted in the 2007 U.S. DoS report. It also adopted Law No. 547, criminalizing funds related to CFT, acts of public/private funds theft, and counterfeiting, as well as Law No. 553, which provides an extension to the Penal Code on terrorist financing. According to the 2007 U.S. DoS report, Lebanese law provides for the confiscation, freezing, and seizing of proceeds of crime. The SIC, Lebanon's FIU, was established under Law No. 318 as an independent legal entity with judicial powers. The SIC, as noted on its website, "receives, analyzes, investigates STRs, and ensures compliance of banks, financial institutions and other reporting entities with the AML/CFT regulations." According to the 2007 U.S. DoS report, an SIC Remote Access Communication (SRAC) system was implemented in 2005 to improve the exchange of information on AML/CFT issues, which resulted in an increase in the number of STRs. Other organizations involved with regard to supervising money laundering activities in Lebanon are customs, the police, and the general state prosecutor.

As of 2006, the SIC has signed 15 MoUs with other FIUs and has been working on a self-assessment to further improve its compliance with FATF Recommendations in light of a possible assessment by international bodies by late 2007 or early 2008, as stated in the 2007 U.S. DoS report. Nevertheless, there is little information publicly available addressing Lebanon's compliance with the FATF recommendations relating to this principle.

2. Preventive Measures - Financial Institutions

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As noted on its website, the Central Bank of Lebanon (CBL) is an autonomous authority which regulates and grants licenses to all banks and financial institutions and is responsible for safeguarding the soundness of the banking sector. According to the 2007 U.S. DoS report, financial institutions and banks are subject to the provisions of the 1956 Law on Banking Secrecy, as well as the 2001 AML law, which clarifies the CBL's powers to "require financial institutions to identify all clients, maintain records of customer identification information, request information about the beneficial owners of accounts, conduct internal audits, and exercise due diligence in conducting transactions for clients." The 2007 U.S. DoS report further states that Law No. 318 of 2001 expanded the type of financial institutions subject to AML/CFT requirements to include exchange offices, financial intermediation companies, leasing companies, mutual funds, and insurance companies. According to the CBL website, the SIC is responsible for receiving and investigating STRs. In 2005, an SRAC system was implemented to improve the exchange of information on AML/CFT issues, resulting in an increase in the number of STRs. Nevertheless, there is little information publicly available addressing Lebanon's compliance with the FATF recommendations relating to this principle.

3. Preventive Measures - Designated non-Financial Business and Professions

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According to the 2007 U.S. DoS report, provisions of the 2001 AML Law expand the type of financial institutions subject to the requirements of the 1956 Law on Banking Secrecy to include institutions such as exchange offices, financial intermediaries, leasing companies, mutual funds, insurance companies, real estate companies, and firms engaged in high-value transactions. Furthermore, the 2001 AML Law requires real estate companies, as well as firms engaged in high-value transactions to provide STRs. Nevertheless, there is little information publicly available addressing Lebanon's compliance with the FATF recommendations relating to this principle.

4. Legal Person and Arrangements & Non-Profit Organizations

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According to the 2007 U.S. DoS report, charitable and nonprofit organizations are required to register with the Ministry of Interior and Municipalities (MOIM), and have proper corporate governance, including audited financial statements. Furthermore, such organizations are subject to the same STR requirements as other institutions. Nevertheless, there is little information publicly available addressing Lebanon's compliance with the FATF recommendations relating to this principle.

5. National and International Co-operation

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There is little information publicly available addressing Lebanon's compliance with the FATF recommendations relating to this principle. During 2003, Lebanon joined the Egmont Group and increased inter-agency cooperation, notably with customs and the police, according to the 2007 U.S. DoS report. On November 30, 2004, according to the same report, Lebanon was elected as head of the MENAFATF, which promotes AML/CFT measures in the MENA region. Furthermore, Lebanon ratified the 1988 UN Drug Convention, with reservations on bank secrecy, and adopted the 2000 UN Convention against Transnational Organized Crime. On the other hand, Lebanon is not a party of the 1999 UN International Convention for the Suppression of the Financing of Terrorism or the 2003 UN Convention against Corruption. According to the 2007 U.S. DoS report, as of 2006, the SIC has signed 15 MoUs with other FIUs. Furthermore, as noted in the 2007 U.S. DoS report, the SIC has actively been providing support to international criminal case referrals.