SAUDI MEDIA REPORTS THAT THE GOVERNMENT OF LEBANON IS PAYING NEXT OF KIN OF DEAD HEZBOLLAH TERRORISTS USD$20,000, AND IS DEFERRING PAYMENT OF TAXES BY RESIDENTS IN HEZBOLLAH-CONTROLLED AREA.

In a very disturbing development, media in Saudi Arabia has reported that the Government of Lebanon, based upon statements of officials in Beirut, that it is paying the Next of Kin of all Hezbollah terrorists who die as the result of the organizations' attacks upon Israel USD$20,000. Christian members of the Parliament of Lebanon have lodged formal complaints regarding this practice.

Additionally, all Lebanese citizens who reside in the large area of South Lebanon which is under Hezbollah military control have been granted an exemption from taxes and fines by the National Government. Given the country's dire financial situation, this will only exacerbate the problem of paying the country's employees and the extremely high debt service requirements.

Compliance officers at international banks whose customers trade with Lebanon should examine the situation, with regards to raising Country Risk for Lebanon, as well as take a fresh at confirming that customers' customers are not Hezbollah.