In the mid-1990s, an international campaign was launched to fight money laundering and impose restrictions on the movement of illegal money. Lebanon responded to the demands of this campaign as the country’s banking secrecy laws have been used as grounds for accusations of illegal activity. Decree No. 318 was issued on April 26, 2001 in order to combat money laundering activities.

Defining The Concept of Illegal Money

According to the first article of this law, monies that result from committing one of the following crimes constitutes illegal money:

• Drug cultivation and its production or trade
• Acts of organized crime
• Terrorism according to clauses 314, 315 and 316 of Lebanese Penal Law
• Illegal arms dealing
• Embezzlement of public or private funds
• Forgery of currency or public bonds

Money Laundering Crimes & Penalties

The law considers money laundering any act that has the purpose of hiding the source of illegal money, or owning or transferring those monies. Any individual who takes part or carries out money laundering operations is subject to a prison sentence ranging from three to seven years, in addition to a minimum fine of LL 20 million ($13,200).

Special Investigative Committee

The law calls for the formation of a special investigative committee to look into suspected money laundering operations and report any evidence that crimes have been committed.

This committee includes the Central Bank Governor, or anyone appointed by him from the Vice-governors, as head of the committee. Members include the chief of the Banking Control Committee or his appointed representative, the Higher Banking Committee’s appointed judge, a permanent member and an alternate selected by the Council of Ministers.

In order to organize and support the work of this unit, the Central Bank issued a number of decisions and circulars, including Decision No. 7818, dated May 18, 2001 regarding control mechanisms over financial operations to fight money laundering.

Money Laundering & Banking Secrecy

The problem of creating a balance between banking secrecy and the law fighting money laundering was addressed with the issuance of the banking secrecy law in 1956. The law designated the following instances in which secrecy can be waived:

• Through a customer’s written authorization or that of his heirs
• When a customer declares bankruptcy
• When a lawsuit is filed against a customer by the bank
• In cases of illegal wealth as per Law 104/99

Therefore, the money laundering law includes a clause that allows the waiving of banking secrecy in the case of money laundering (according to the cases designated in Article 1 of this clause). However, it is only the investigative committee that has the authority to decide on waiving of banking secrecy and the committee’s decisions are not subject to any kind of ordinary or extraordinary administrative or legal appeals.

Accomplishments of the Special investigative Committee

Since its inception, this committee has investigated 29 suspected cases, 17 of which were referred from other nations or foreign bodies, and 12 from internal parties. Twenty-two cases were transferred to the Public Prosecutor’s Office and in seven cases the money laundering law was not considered applicable.
The parties who reported these cases were:

• Ten banks
• Five embassies or foreign governments
• Seven police or judicial bodies
• Four security councils

The overall amount of suspected monies relating to those cases amounted to LL 23.8 billion ($15.8 million, in all currencies). As for the monies that were frozen, they amounted to LL 7.9 billion ($5.2 million, in all currencies).

With respect to the steps taken by the Lebanese government, the question arises as to the position of GAFFI, which issued 40 recommendations in 1989 regarding the strengthening of the financial and banking sectors against money laundering through three frameworks:

• Legal: The development of laws to combat money laundering
• Banking: Strengthening disclosure and knowledge of customers
• International: Greater international cooperation to combat money laundering.

Faced with Lebanon’s governmental and banking procedures to combat money laundering activities, GAFFI recently responded by omitting Lebanon from the list of uncooperative nations in the fight against illegal money. This procedure, which took place at the end of June, constituted an important step in reinforcing and developing Lebanon’s national economy.