RegionsMiddle EastCaught in the Cross-Fire – Lebanese Response to US Banking Demands

Caught in the Cross-Fire - Lebanese Response to US Banking Demands

Banks in Lebanon have become embroiled in bitter political wrangling stemming
from a US call to freeze all funds belonging to Hamas, the militant Palestinian
group. The US first made the call in late August, in response to a bus bombing
in Israel that killed 20 people, and included several Islamic charities and
six of Hamas’ top leaders in its list of proscribed entities and persons.

The Lebanese government responded to pressure from the US by ordering the country’s
banks to disclose the existence of any accounts linked to Hamas, although a
central bank official reportedly said that no decision has yet been taken to
freeze the accounts if any are found. Banks in Lebanon have to state whether
they hold any direct or indirect accounts of listed individuals or organisations,
including Hamas founder Sheikh Ahmad Yassin, Damascus-based officials Imad Kahlil
Al Alami, Kalid Meshaal and Mussa Abu Marzuq, and Lebanon-based organisation,
Sanabil Association for Relief and Development.

While the bank’s check through their customer information, opposition
parties have been criticising the central bank for co-operating with US authorities,
especially when the Financial Action Task Force (FATF), an inter-governmental
body set up by G7 summit in 1989 to monitor money laundering, removed Lebanon
from its list of non-cooperating countries in June 2002.

Another reason the investigations are so sensitive is that this is the first
time the US has taken action against the political and humanitarian arms of
Hamas as well as its paramilitary members. In September the EU agreed to freeze
the assets of Hamas in Europe, a decision that effectively means that the EU
recognises the militant group as one organisation with no delineation made between
its political and military wings. The EU banned the Hamas military wing in 2001,
but not the political wing, which undertakes a number of charitable and educational
activities. The latest EU decision affects a number of Europe-based organisations,
including Association de Secours Palestiniens in Switzerland, the France-based
Comite de Bienfaisance et de Secours aux Palestiniens, and INTERPAL in the UK.

The Palestinian Authority was also swift to comply with the US request, freezing
39 bank accounts of nine Islamic charities in August. Banks were told that no
money could be withdrawn from the charities’ accounts without authorisation
of the attorney general.

Meanwhile, some of the charity groups have threatened to take action, saying
that the US action is about intensifying pressure on Palestinians and not about
fighting the ‘war on terror’. There has been no indication how long
the freeze will last for any of the individuals or organisations affected.

Measures taken since 9/11

Faced with accusations of terrorist funding and support, a number of Middle
East governments have taken a tough stance against terrorist funding and money
laundering since 9/11. The Saudi Arabian Monetary Agency (SAMA) has instructed
Saudi banks to establish a supervisory committee to closely monitor terrorist
links and coordinate efforts to freeze the assets of identified individuals
and entities. The government has also created an institutional framework for
combating money-laundering and SAMA is working closely with law enforcement
agents. Other specific actions include auditing all charitable groups to ensure
there are no links to suspected groups, and developing plans with the finance
ministers and central bank governors of the G-20 to root out and freeze terrorist
assets worldwide.

The UAE has also been under pressure to tighten the financial noose around
money laundering and terrorist financing activities since it was revealed that
some of the hijackers involved in 9/11 had moved cash through UAE companies.
In response, the Emiratea passed an anti-money laundering law and imposed tight
restrictions on transfers in January 2002, and implemented the 40 recommendations
of the FATF on combating money laundering.

The Kingdom of Bahrain, keen to maintain its reputation as a financial centre,
has also implemented similar measures. The Bahrain Monetary Authority has in
the past two years significantly upgraded its legal and regulatory framework
aimed at tackling money laundering and terrorist financing issues, including
compliance with the FATF recommendations.

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