Lebanon’s Private Sector: A Key Driver for FATF Gray List Exit

Beware of Disorderly and Fragmented AML/CFT Compliance!

Lebanon’s financial system is at a crossroads. As the newly formed government works to restore trust and reestablish international financial ties, ensuring a coherent and effective AML/CFT compliance framework is not just a regulatory requirement—it is an urgent necessity.

Lebanon suffers from:

Disorderly Compliance - where rules are inconsistently applied, enforcement is weak, and oversight is reactive rather than proactive - creates loopholes that financial criminals exploit. Fragmented Compliance - where different institutions follow different standards or fail to coordinate - undermines Lebanon’s ability to meet international obligations (Exit FATF’s Gray List) and risks further isolation from the global financial system.

Without a unified and transparent AML/CFT strategy, Lebanon faces severe consequences, including:

1. Increased Derisking – International banks may continue cutting ties with Lebanese financial institutions.
2. Loss of Correspondent Banking Relationships – Without trusted channels, trade, remittances, and foreign investments will suffer.
3. Regulatory and Financial Sanctions – Non-compliance with FATF (Financial Action Task Force) standards could lead to Lebanon being placed on international blacklists.

To rebuild confidence, your government must:

• Unify AML/CFT policies across all financial and regulatory institutions.
• Ensure strict enforcement and oversight, free from political interference.
• Leverage technology for real-time monitoring and risk assessment.
• Engage in international cooperation to regain credibility and restore trust.

The world is watching Lebanon’s financial recovery. Strong, well-coordinated AML/CFT compliance is not an option - it is the foundation for economic stability, investor confidence, and financial sovereignty.

Lebanon’s financial system remains under intense scrutiny as it seeks removal from the FATF Gray List. While regulatory reforms and government initiatives are essential, the role of the private sector is equally, if not more, critical. Banks, financial institutions, businesses, and professional service providers must take proactive steps to ensure compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) regulations. Beyond mere adherence to rules, the private sector must foster a culture of transparency, accountability, and cooperation with regulators. Without its full engagement, Lebanon’s efforts to exit the Gray List by 2026 will face significant setbacks. This document outlines the key responsibilities and actions the private sector must undertake to support this national objective.

The private sector plays a crucial role in steering Lebanon out of FATF’s Gray List, as it is directly impacted by the consequences of financial non-compliance. Its responsibilities extend beyond mere compliance; it must actively support and collaborate with regulatory bodies to implement and sustain reforms. Here’s how:

1. Strengthening Customer Due Diligence (CDD) and Compliance Culture

Who is Responsible? Banks, financial institutions, and businesses.

What Must Be Done?

• Ensure strict adherence to CDD and Know Your Customer (KYC) regulations.
• Implement enhanced due diligence (EDD) measures for high-risk clients, including politically exposed persons (PEPs).
• Utilize automated transaction monitoring systems to flag suspicious activities.

Why is This Critical? If the private sector fails to enforce strong CDD, money laundering and terrorist financing risks will persist, preventing Lebanon’s removal from the Gray List.

?

2. Transparent Beneficial Ownership Reporting

Who is Responsible? Private businesses, law firms, and corporate service providers.

What Must Be Done?

• Accurately report and disclose ultimate beneficial ownership (UBO) information.
• Ensure proper record-keeping and regular updates on corporate structures.
• Cooperate with authorities to prevent the misuse of shell companies.

Why is This Critical? If businesses obscure ownership details, Lebanon will remain flagged for opacity in financial transactions, blocking progress toward compliance.

?

3. Active Collaboration with Regulators

Who is Responsible? Private sector stakeholders, including financial institutions and industry associations.

What Must Be Done?

• Work closely with regulators to implement FATF-compliant policies.
• Participate in public-private partnerships to enhance financial intelligence-sharing.
• Provide feedback on practical challenges faced in implementing reforms.

Why is This Critical? If businesses do not engage in a transparent, cooperative approach, reforms will remain theoretical rather than effectively implemented.

?

4. Enhancing the Regulation of Non-Financial Businesses and Professions (DNFBPs)

Who is Responsible? Real estate agents, lawyers, accountants, and other high-risk professionals.

What Must Be Done?

• Apply risk-based AML/CFT measures to prevent abuse of real estate and legal structures.
• Report suspicious transactions to the Special Investigation Commission (SIC).
• Ensure proper record-keeping and regulatory compliance.

Why is This Critical? If DNFBPs fail to implement AML measures, illicit actors will continue exploiting these sectors, undermining national efforts.

?

5. Adapting to New Technologies and Virtual Assets Regulations

Who is Responsible? Fintech companies, cryptocurrency exchanges, and digital payment providers.

What Must Be Done?

• Adopt risk-based compliance frameworks for virtual assets.
• Implement fraud prevention and anti-money laundering technologies.
• Cooperate with regulators to ensure proper oversight of digital transactions.

Why is This Critical? Without a compliant digital financial ecosystem, Lebanon will be seen as a high-risk jurisdiction for illicit digital transactions.

6. Strengthening Internal Compliance and Training Programs

Who is Responsible? Compliance officers, auditors, and financial professionals.

What Must Be Done?

• Conduct regular training on FATF requirements for employees.
• Maintain internal compliance audits to detect and mitigate risks proactively.
• Build a culture of transparency and ethical financial practices.

Why is This Critical? A lack of training and internal oversight can lead to regulatory breaches, undermining Lebanon’s credibility.

The Private Sector as a Critical Partner

Lebanon’s exit from the Gray List depends not only on government reforms but also on private sector compliance and cooperation. If banks, businesses, and professionals fail to implement FATF recommendations, no amount of government action will be sufficient. The all-or-nothing approach applies here too—the private sector must function as a responsible financial guardian, working alongside regulators to ensure Lebanon’s reintegration into the global financial system.

For Lebanon to successfully exit the FATF Gray List by 2026, the private sector must shift from passive compliance to active partnership in financial reform. Strengthening due diligence, ensuring transparent ownership reporting, engaging in regulatory collaboration, and adapting to evolving digital financial regulations are all essential steps. Businesses and financial institutions must recognize that compliance is not just a legal obligation but a strategic necessity for restoring confidence in Lebanon’s financial system. Moving forward, sustained engagement, continuous training, and sector-wide coordination will determine whether Lebanon can reintegrate into the global financial community and secure a more stable economic future.