Lebanon's failure to comply with US anti-terrorism funding laws will isolate banks: Salameh

Published May 19th, 2016 - 12:00 GMT
The Act that was passed in the US is an U.S. act whose implementation is required throughout the world and in Lebanon, said Central Bank Governor Riad Salameh. (The Daily Star)
The Act that was passed in the US is an U.S. act whose implementation is required throughout the world and in Lebanon, said Central Bank Governor Riad Salameh. (The Daily Star)

Central Bank Governor Riad Salameh warned Tuesday that failing to comply with U.S. law targeting Hezbollah’s finances could isolate Lebanese banks from international markets.

Salameh made the remarks in a statement in response to Hezbollah’s criticism of the new Central Bank circular which set the conditions for freezing suspicious bank accounts belonging to the party.

“Without this circular, correspondent banks may resort to derisking policies, which in turn will isolate our banking sector from the rest of the world, while the financing of Lebanon relies primarily on expatriates’ and nonresidents’ transfers, and while residents need global and continuous international banking relations to fund their imports and exports and the needs of individuals and households,” he said.

Hezbollah’s MPs and ministers slammed the Central Bank’s approach to address the U.S. law to tighten the noose on the finances of the party.

Some party MPs claimed that Salameh and commercial banks are being more loyal than the king himself, in reference to the Americans.

There were also reports that some banks have closed the accounts of two Hezbollah MPs.

A source close to Hezbollah told The Daily Star that the party realizes that Lebanon has no choice but to comply with the U.S. law.

“But the party feels that some banks are freezing some accounts without going back first to the Central Bank or the Special Investigation Commission,” the source said.

The source reassured that Hezbollah officials will not go beyond the statements criticizing the banking sector.

Some Lebanese parties blasted Hezbollah’s attacks against the banking sector.

In a statement, the Future Movement protested the negative position of Hezbollah.

“We strongly condemn the position of Hezbollah’s parliamentary bloc which called on banks not to comply with the U.S. law,” the statement said.

It warned that Hezbollah is threatening the Lebanese economy and the banking sector with these positions.

Salameh said that his statement was aimed at clarifying few points following the statements and stances concerning the U.S. Hezbollah International Financing Prevention Act, as well as the decisions taken by the Central Bank in this regard.

“The Act that was passed in the USA is an U.S. act whose implementation is required throughout the world and in Lebanon. Therefore, Circular No. 137 issued by [the Central Bank] on May 3, 2016, was a Lebanese legal obligation,” Salameh said.

He stressed that Article 70 of the Code of Money and Credit – the law that established and governs the Central Bank – requires that the bank ensure credit stability.

“However, credit stability cannot be guaranteed without the implementation of this U.S. act. The issuance of [Central Bank] Circular No. 137 is reassuring for correspondent banks and confirms that banking activity in Lebanon complies with international requirements and standards,” Salameh explained.

He repeated that this circular is imperative to protect Lebanon, the economy and its banking sector. Salameh also responded to Hezbollah’s criticism of the mechanism applied by the Central Bank to implement the U.S. law.

“Regarding the mechanism adopted to preserve our national interests and financial integration, based on Lebanese law, this mechanism relies on the issuing by the [Central Bank] Central Council of a circular with a two-pronged approach: implementing the U.S. act, and justifying the closing or non-opening of an account, pursuant to this act, before the Special Investigation Commission established at [the Central Bank] as an autonomous entity with judicial status,” he added.

The statement also clarified some the procedures applied by the Central Bank. “Pursuant to the Banking Secrecy Law, [the Central Bank] Central Council cannot access credit accounts movement. Nor banks can be legally compelled to grant it access to any credit account. As for the Banking Control Commission, it can only access debit account only,” Salameh said.

He added that the Special Investigation Commission is the legal party to access credit and debit accounts.

“During its last meeting, the SIC agreed on basic principles that enable us to monitor banks’ behavior toward their clients, relative to the implementation of [Central Bank] Circular No. 137. Legally, the SIC is the only body entitled to access both credit and debit accounts, without invoking banking secrecy against it,” Salameh said.

He called on banks to give a justification if they decided to close an account. “Banks wishing to close accounts held by persons or institutions that they believe to infringe the U.S. act must justify this before closing the account. The justification must include the account movement [frequency/significance],” Salameh said.

He added that the bank must wait for the SIC response before closing the account. “In case no response is received within 30 days, then the bank shall act at its own responsibility. If needed, the banks and the SIC might refer to the Higher Banking Commission whose decisions, pursuant to the Lebanese law, may not be subjected to any review,” Salameh said.

He added that the Banking Control Commission will issue an implementation circular relating to debit accounts approved for closure, as well as the handling of any such account in terms of accounting and banking.

By Osama Habib
 

 

 

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