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French Version

US raps Lebanon over money laundering

Report lists country as one of region's worst offenders

Lebanon remains one of the worst money laundering offenders in the Middle East, despite government efforts to crack down on the activity, according to a report released by the US State Department. The US State Department's international narcotics control strategy report also identified the United Arab Emirates, Israel and Cyprus as countries that need to do more to crack down on money laundering.

The United States and several European countries also made the list of major money laundering states.

Lebanon has in recent years made numerous changes to laws and regulations in an effort to crack down on money laundering. As a result, the Financial Action Task Force (FATC) removed Lebanon from a list of countries that it says have failed to combat money laundering.

The Lebanese central bank has said that money laundering activity has drastically diminished since 2001, after Parliament approved a new law on money laundering.

But the State Department report suggests that more efforts need to be made to curb the illegal activity in Lebanon.

"Laundered criminal proceeds come primarily from domestic criminal activity, which is largely controlled by organized crime," the report said.

It added that in May 2007, members of the Fatah al-Islam militant group stole $150,000 from a BankMed branch in Tripoli in northern Lebanon.

The report said that there is some smuggling of cigarettes and pirated software, but this does not generate large amounts of funds that are laundered through the banking system.

Lebanese customs officials have had some recent success in combating counterfeit and pirated goods.

The illicit narcotics trade is not a principal source of money laundering proceeds.

The report acknowledged that Lebanon has made important progress over the past few years in combating money laundering at all levels.

It said that Lebanon has continued to make progress toward developing an effective anti-laundering and anti-terrorist financing regime by incorporating the FATF recommendations and facilitating access to banking information and records by judicial authorities.

The report added that Lebanon receives a substantial influx of remittances from expatriate workers and family members, estimated by banking sources to reach $4 to $5 billion a year. "Such family ties are reportedly involved in underground finance and trade-based money laundering," it said.

The report noted that Lebanon has a large expatriate community throughout the Middle East, Africa and parts of Latin America.

"They often work as brokers and traders. Many Lebanese 'import-export' concerns are found in free trade zones. Many of these Lebanese brokers network via family ties and are involved with underground finance and trade-based money laundering," the report said.

It added that informal remittances and value transfer in the form of trade goods add substantially to the remittance flows from expatriates via official banking channels.

"For example, expatriate Lebanese brokers are actively involved in the trade of counterfeit goods in the tri-border region of South America and the smuggling and laundering of diamonds in Africa. There are also reports that many in the Lebanese expatriate business community willingly or unwillingly give 'charitable donationsCharity-Makes-Wealth Nov-07 ' to representatives of Hizbullah," the report said.

The report also focused on diamond and jewelry trading in Lebanon.

In 2004, Lebanon passed a law requiring diamond traders to seek proper certification of origin for imported diamonds. The Economy and Trade Ministry is in charge of issuing certification for re-exported diamonds.

This law was designed to prevent the trafficking of "conflict diamonds" and allowed Lebanon to join the Kimberley Process in September 2005.

"However, in 2005, investigations by Global Witness, a nongovernmental organization, discovered that according to Lebanese customs data, Lebanon imported rough diamonds worth $156 million from the Republic of Congo, a country removed from the Kimberley Process Certification Scheme for having a 'massive discrepancy' between its actual diamond production and declared exports," the report said.

It added that this documented example of suspect imports from the Republic of Congo throws serious doubts on the Lebanese authorities' commitment to countering the trade in conflict diamonds.

"Moreover, there have been consistent reports that many Lebanese diamond brokers in Africa are engaged in the laundering of diamonds - the most condensed form of physical wealth in the world," it said.

"The government of Lebanon should encourage more efficient cooperation between financial investigators and other concerned parties, such as police and customs, which could yield significant improvements in initiating and conducting investigations," the report recommended.

Beirut 26-03-2008
The Daily Star

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