15 Apr 2020
Hezbollah is stepping up a campaign to place allies at the heart of Lebanon’s financial authorities as the US seeks to disrupt the armed group’s financial networks, four senior Arab financiers said on Thursday.
The outcome of the political battle could extend Hezbollah’s reach to the nerve centre of Lebanon’s banking sector – once the most important in the region – and could hamper any chance the country has of emerging from the worst financial crisis in its modern history, they said.
One of the four sources said Hezbollah “is delving into uncharted territory” by trying to install allies into the – until now – largely independent monetary authorities to help it circumvent intensified US sanctions.
The US has been stepping up its financial pressure on Hezbollah – sanctioning dozens of its members business associates, as well as institutions tied to the group. The US has also placed crippling sanctions on Hezbollah’s benefactor – Iran.
“For almost three decades the monetary authorities have been forced into an accommodation with Hezbollah while maintaining their relative independence,” the Lebanese financier said. “It is something else for Hezbollah to put its hand on the system.”
The banking sources in Beirut and the Arabian Gulf spoke to The National on condition of anonymity citing the sensitivity of the issue, and the power of Hezbollah, the only player allowed to keep its arms after the country’s 15-year civil war ended in 1990.
Since Lebanon’s financial system came under huge strain last year, the value of the Lebanese pound has almost halved. The pound was trading on the black market in Beirut at 2,950 to the dollar on Tuesday, compared with the official rate of around 1,507 to the dollar six months ago.
At the centre of the power-struggle is Riad Salameh, governor of Banque du Liban (BDL), the central bank, since 1993.
Mr Salameh is one of the most well-connected Lebanese figures in the United States and the man who ensures Lebanon’s enforcement of US sanctions on Hezbollah to protect the financial system. Washington says its measures have helped cut off channels for hundreds of millions of dollars a month in illicit funding for the group.
For years, Lebanese banks have had to comply with compliance requests from the US aimed to prevent Hezbollah using the system.
But last year Washington sanctioned the Jammal Trust bank over ties to Hezbollah that forced Mr Salameh to withdraw its banking licence. In 2011, the Lebanese Canadian Bank faced a similar fate.
Washington has also offered rewards for information regarding Hezbollah’s financing conduits, announcing on Friday a $10 million (Dh36.7m) bounty on a top operative of the group.
The State Department said the reward for information on Mohammad Kawtharani comes under US efforts for “disruption of the financial mechanisms of the terrorist organisation Lebanese Hezbollah”.
Hezbollah’s treads into new territory
Now Hezbollah’s political allies are moving to try to appoint their clients to some of the four open positions for vice governor of BDL as well as top spots in the Banking Control Commission that oversees the daily operation of the country’s 142 lenders.
Lebanon’s financial community was alarmed by the attempt because BDL has been one of the most independent institutions in the country.
There has long been an understanding among politicians who competed for spoils elsewhere in the system that the monetary authorities were too important for the survival of the country as a functioning entity to be politicised.
Political associates of Hezbollah, and its main Shiite ally, Parliament Speaker Nabih Berri, already hold the main portfolios of finance and the interior ministry despite the government insisting it is an independent administration.
But the plan was derailed when former Lebanese Prime Minister Saad Hariri, a close friend of Mr Salameh, threatened to pull his allies from parliament if the cabinet passed the appointments, a senior Lebanese financier with knowledge of the proceedings said.
“Four vice governors unanimously hostile to Salameh would have greatly curbed his power,” the financier said.
There was no immediate comment from Mr Hariri’s office.
On April 2, Prime Minister Hassan Diab, a Sunni Muslim, shelved the vote in cabinet at the last minute to avoid a rift.
Although Hezbollah supports Mr Diab, and his government received the endorsement of parliament with few abstentions, he does not have a Sunni political group behind him that could have kept his administration together had Mr Hariri withdrawn from parliament.
Exerting a large influence on Mr Diab is Ahmad Jashi, a top prime ministerial adviser and a long-time critic of how of Banque du Liban functions, the sources said.
By Khaled Yacoub Oweis, The National, 15 April 2020
Read more at The National
RiskScreen: Eliminating Financial Crime with Smart Technology
Advance your CPD minutes for this content, by signing up and using the CPD WalletFREE CPD Wallet