The Laundry Man by Kenneth Rijock ( Penguin/Random House UK)

Friday, May 27, 2016


The Hezbollah International Financing Prevention Act of 2015, which was passed last December, provides severe potential penalties for Lebanese financial institutions that bank Hezbollah. The problem is that Hezbollah has taken the position that only the approximately one hundred Hezbollah individuals, and entities, actually designated by OFAC are affected, and it has objected to closing any other accounts on  HIFPA grounds.

Some accounts of clients not specifically sanctioned have already been closed, and Hezbollah has strongly protested. Given the terrorist group's dominant position in Lebanon, bank retreat from account closings could result in US actions which would effectively force the bank to eventually close.

The Central Bank of Lebanon, fearful that some commercial banks will be sanctioned, with disastrous results, and Lebanon effectively isolated from the American financial system, has made the case for actual account closure, and offered up a review process, whereby its Special Investigations Committee would review the bank's evidence. Unfortunately, without any uniform standard, and given Hezbollah's power to influence, bank retreat from threats to close an account could very well occur.

Compliance officers at Western banks that routinely deal with Beirut's financial institutions should therefore be alert to the possibility that Hezbollah agents, and officials, whose accounts end up remaining open, in violation of HIFPA, and move terrorist financing funds through your bank, exposing your institution to the risk a charge of Providing Material Support to a Designated Terrorist  Organization. Transactions with Lebanese banks therefore remain at elevated risk levels.

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