Evidence that organized criminal groups, international terrorists, or entities involved in the proliferation of weapons of mass destruction or missiles, have transacted business in that jurisdiction

Lebanon operates under the influence of Hizballah. Hizballah is a known terrorist organization that has been designated by the U.S. Hizballah is known or suspected to have been involved in numerous terrorist attacks. It has been historically connected to Iran and Syria.

Hizballah is a known terrorist organization that has been designated by the U.S. as a Foreign Terrorist Organization (FTO) by the Secretary of State in accordance with section 219 of the Immigration and Nationality Act (INA), as amended. (U.S. State Department Website)

Hizballah is known or suspected to have been involved in numerous anti-U.S. terrorist attacks, including the suicide truck bombings of the U.S. embassy and U.S. Marine barracks in Beirut in April and October 1983, respectively. Receives substantial amounts of financial, training, weapons, explosives, political, diplomatic, and organizational aid from Iran and Syria. (Center for Defense Information Website)

The extent to which that jurisdiction or financial institutions operating in that jurisdiction offer bank secrecy or special regulatory advantages to nonresidents or nondomiciliaries of that jurisdiction

Lebanon's bank secrecy policies have been historically worrisome, and recent findings regarding the Lebanese Canadian Bank indicate that there are remaining concerns about the Lebanese banking system.

"The country's 1956 Law on Bank Secrecy prohibits bank managers and employees from revealing client names, or information regarding client assets and holdings (with certain limited exceptions) to any individual or public administrative, law enforcement, or judicial authority.

- The Banking Control Commission, with supervisory authority over all commercial banks in Lebanon, does not have access to individual account information and the names of depositors.
- Numbered accounts are permitted in Lebanon. Only bank managers know the identities of numbered account-holders, and they are prohibited by the Law of Bank Secrecy from revealing this information to Lebanese officials.
- The Law on Bank Secrecy may impede access to financial and commercial records in criminal investigations. However, bank secrecy does not apply to investigations into public corruption or money laundering charges involving drug manufacturing.
- The Law on Bank Secrecy can operate to prevent foreign authorities from obtaining customer identity information, even pursuant to formal requests for judicial assistance."

(FinCEN Advisory 18, July 2000)

This Advisory was withdrawn by FinCEN in July 2002 because of the enactment of a new counter-money laundering system. However, recent findings concerning the Lebanese Canadian Bank indicate that there are remaining concerns about the Lebanese banking system.

The substance and quality of administration of the bank supervisory and counter-money laundering laws of that jurisdiction

After significant pressure from the U.S., Lebanon enacted anti-money laundering legislation. However, loopholes remain as the policy does not cover all terrorist financing transactions nor does it cover Hizballah's activities.

“Lebanon faces significant money laundering and terrorist financing vulnerabilities. For example, Lebanon has a substantial influx of remittances from expatriate workers and family members, estimated by the World Bank at $7 billion per year. It has been reported that a number of these Lebanese abroad are involved in underground finance and trade-based money laundering (TBML) activities. Laundered criminal proceeds come primarily from foreign criminal activity and organized crime."

"In 2001, Lebanon enacted its anti-money laundering (AML) legislation, Law No. 318. This legislation creates a framework for lifting bank secrecy, broadening the criminalization of money laundering, and facilitating access to banking information and records by judicial authorities. Under this law, money laundering is a criminal offense. Law No. 318 broadens the criminalization of money laundering beyond narcotics but does not cover all terrorist financing transactions."

"In 2003, Lebanon also adopted Laws 547 and 553. Law 547 expands Article One of Law No. 318, criminalizing any funds resulting from the financing or contribution to the financing of terrorism or terrorist acts or organizations based on the definition of terrorism as it appears in the Lebanese Penal Code. Such definition does not apply to Hizballah, which is considered a legitimate political party..."

(The 2010 International Narcotics Control Strategy Report)

The relationship between the volume of financial transactions occurring in that jurisdiction and the size of the economy of the jurisdiction

Lebanon’s devastated economy suspiciously supports a stable banking system. While Lebanon’s GDP is around $40 billion, roughly equivalent to Uruguay, Lithuania, Costa Rica or Ghana, its sovereign debt is $53.8 billion – the fourth largest debt to GDP ratio in the world. Lebanon has consistently struggled to service its debt as the country’s underlying growth continues to decline. Despite these issues, Lebanon’s sovereign bonds and corresponding credit default swaps (“CDS”) appear to trade at low yields with no rational economic explanation. Questionably, Lebanon’s cost of debt in 2006 and 2007 was much higher (approximately 9%) than it is today (between 5% and 6%) – conveniently corresponding with increased sanctions pressure against Iran. All signs point to a serious risk of sovereign default, but even with its enormous debt, Lebanon’s currency and banking system act like a far more successful sovereign.

Hizballah’s leader Hassan Nasrallah acknowledged that Hizballah is financially supported by Iran. That support is reported to be at least hundreds of millions of dollars per year. Iran’s support is the keystone by which Hizballah has built its dominant presence in Lebanon and avoided the economic stranglehold of U.S. and EU sanctions.

It is clear that Lebanon’s false economy is being artificially propped up by such massive cash inflows.

See UANI’s economic and financial analysis and presentation on Lebanon and UANI’s letter to Banque du Liban’s Governor Riad Salame of May 28, 2012.

Iran’s role in Hizballah is no secret, but only in February of 2012 did Hizballah’s leader Hassan Nasrallah admit in a speech that Hizballah is financially supported by Iran. (Hurriyet Daily News, “Iran funds Hezbollah, leader Nasrallah admits,” 2/9/2012)

“Hezbollah has long relied almost exclusively on its relationship with Iran and Syria for funding. Since the early 1990s, Hezbollah has operated with a guaranteed annual contribution of at least $100 million a year from Tehran. Early last decade, Iran doubled that investment to more than $200 million a year, and its financial support for Hezbollah reached its pinnacle in 2008-9. “ (Foreign Affairs, “Hezbollah: Party of Fraud, How Hezbollah Uses Crime to Finance its Operations,” 7/27/2011)

The extent to which that jurisdiction is characterized as an offshore banking or secrecy haven by credible international organizations or multilateral expert groups

Lebanon is considered an offshore tax haven known for its banking secrecy policies.

The Congressional Research Service report entitled “Tax Havens: International Avoidance and Evasion” identifies Lebanon as a tax haven jurisdiction. (CRS Report, “Tax Havens: International Avoidance and Evasion,” Jane G. Gravelle, 9/3/2010)

The Financial Secrecy Index identifies Lebanon as a tax haven with high levels of bank secrecy. (Financial Secrecy Index, “Mapping Financial Secrecy: Lebanon,” Tax Justice Network, 10/4/2011)

Whether the United States has mutual legal assistance treaty with that jurisdiction, and the experience of United States law enforcement officials and regulatory officials in obtaining information about transactions originating in or routed through or to such jurisdiction

The U.S. does not have a mutual legal assistance treaty with Lebanon. Other than a bilateral trade framework agreement, the U.S. and Lebanon have not established any other bilateral treaty or agreement.

The U.S. does not have a mutual legal assistance treaty with Lebanon. (U.S. State Department, "2012 INCSR: Treaties & Agreements," 3/7/20120)

"The U.S. has neither a bilateral investment treaty (BIT) with Lebanon nor an agreement on the avoidance of double taxation. However, on December 1, 2006, the U.S. signed a Trade and Investment Framework Agreement (TIFA) with the Government of Lebanon to help promote an attractive investment climate, expand trade relations, and remove obstacles to trade and investment between the two countries." (U.S. State Department, "Background Note: Lebanon," 12/1/2011)

The extent to which that jurisdiction is characterized by high levels of official or institutional corruption

According to Transparency International's (TI) 2011 Corruption Perception Index (CPI), Lebanon ranked 134 out of 182 countries worldwide and 15 out of 18 MENA countries. (Transparency International's Corruption Perception Index 2011)

"Lebanon has laws and regulations to combat corruption, but these laws are not always enforced. According to Lebanese law, it is a criminal act to give or accept a bribe.... Bribing a government official is also a criminal act. The Central Inspection Directorate is responsible for combating corruption in the public sector, while the public prosecutor is responsible for combating corruption in the private sector. In April 2009, Lebanon ratified the UN Convention against Corruption. Lebanon is not a signatory to the OECD Convention on Combating Bribery. Corruption is more pervasive in government contracts (primarily in procurement and public works), taxation, and real estate registration than in private sector deals. It is widely believed that investors routinely pay bribes to win government contracts, which are often awarded to companies close to powerful politicians...." (U.S. State Department, "2011 Investment Climate - Lebanon," March 2011)

Whether similar action has been or is being taken by other nations or multilateral groups

Lebanon has not been designated as a jurisdiction of primary laundering concern by other nations or multilateral groups. However, Lebanon is subject to numerous UN resolutions and banking sanctions.

U.S. Lebanon-related sanctions, including the designation of the Lebanese Canadian Bank SAL as a financial institution of primary money laundering concern. (U.S. Department of Treasury, “Lebanon-Related Sanctions,” 1/25/2012; U.S. Department of the Treasury, Federal Register, Vol. 76, N. 33, Proposed Rules, 2/17/2011)

The U.S., pursuant to Section 311 of the USA PATRIOT Act, has designated the Lebanese Canadian Bank SAL and the Syrian Lebanese Commercial Bank as financial institutions of primary money laundering concern. (Financial Crimes Enforcement Network, “Section 311 – Special Measures,” accessed 5/26/2012)

The UN Security Council adopted resolution 1701 on August 11, 2006 imposing sanctions against Lebanon in response to the continued escalation of hostilities in Lebanon and Israel stemming from Hizballah’s attack of July 12, 2006 on Israel. The measures imposed against Lebanon include (1) a prohibition on the export of arms and related material to any person in Lebanon and (2) a prohibition on the provision to any person in Lebanon of any technical assistance related to the provision, manufacture, maintenance or use of arms and related materials. (United Nations Security Council Resolution 1701 (2006))

The UN Security Council adopted resolution 1559 on September 4, 2004 calling for the disbanding and disarmament of all Lebanese and non-Lebanese militias. (United Nations Security Council Resolution 1559 (2004))

Whether the imposition of any particular special measures would create a significant competitive disadvantage, including any undue cost or burden associated with compliance, for financial institutions organized or licensed in the United States

The impact of a Section 311 designation on Lebanon would have a de minimis effect on U.S. banks and financial institutions. A Section 311 designation would not create an undue cost or burden for the U.S. financial system.

According to Banque du Liban, very few financial institutions have meaningful connections/operations in the U.S. and/or EU financial systems. (Banque du Liban, “List of Complete Financial Institutions,” accessed 5/26/2012)

“The Lebanese Banking Sector comprises 54 small, medium and large size private commercial banks and 14 specialized medium and long term credit banks better known by investment banks. Banks operating in Lebanon are categorized also, in terms of ownership, as Lebanese, foreign and mixed, hence revealing the diversity and competitiveness of this sector and the low to moderate concentration of activities. The Lebanese banking industry employs currently close to 21,337 employees in 943 branches conveniently spread throughout the country. It manages around USD 140 billion in assets nation-wide (i.e., excluding assets of abroad subsidiaries and other entities) according to the latest available data (June 2011).” (Association of Banks in Lebanon, “Facts & Figures,” October 2011)

The extent to which the action or the timing of the action would have a significant adverse systemic impact on the international payment, clearance and settlement system, or on legitimate business activities involving the particular jurisdiction

Lebanon’s GDP of approximately $40 billion is 80th in the world (out of 193 countries). Its banking and financial system, though important on a regional level, would likely have a limited impact globally.

World Bank Gross Domestic Product Rankings (2010)

The effect of the action on U.S. national security and foreign policy

Lebanon is a country run by Hizballah. Hizballah is a known terrorist organization responsible for numerous terrorist attacks and human rights violations. Hizballah has been designated by the U.S. as a Foreign Terrorist Organization, and it has been considered a proxy of Iran. Such concerns make Lebanon a threat to American national security.

Hizballah is a known terrorist organization that has been designated by the U.S. as a Foreign Terrorist Organization (FTO) by the Secretary of State in accordance with section 219 of the Immigration and Nationality Act (INA), as amended. (U.S. State Department Website)

Hizballah is known or suspected to have been involved in numerous anti-U.S. terrorist attacks, including the suicide truck bombings of the U.S. embassy and U.S. Marine barracks in Beirut in April and October 1983, respectively. Receives substantial amounts of financial, training, weapons, explosives, political, diplomatic, and organizational aid from Iran and Syria. (Center for Defense Information Website)

In February of 2012, Hizballah’s leader Hassan Nasrallah admitted in a speech that Hizballah is financially supported by Iran. (Hurriyet Daily News, “Iran funds Hezbollah, leader Nasrallah admits,” 2/9/2012)

“Of course, one cannot hope to apply effective financial pressure against a group like Hizballah so long as it maintains massive inflows of cash from a state sponsor of terrorism, in this case the Iranian Government.” (Testimony of Adam J. Szubin, Director, Office of Foreign Assets Control, U.S. Department of the Treasury, Before the U.S. Senate Committee on Banking, Housing and Urban Affairs, 9/12/2006)