Banks Get Pressed on Beirut


WASHINGTON—Major Wall Street and European financial firms are coming under pressure to dump their holdings in Lebanese debt and securities from activists who charge that Iran, Syria and the Lebanese militant group Hezbollah are using Beirut’s banking system to launder money and evade international sanctions.

The campaign—which is being led by New York-based United Against Nuclear Iran, or UANI—could threaten Beirut’s financial sector, traditionally among the Middle East’s most important and vibrant. Lebanon’s banking sector historically accounts for around 35% of the country’s total economic output. The U.S. Treasury also has intensified its scrutiny of Lebanon’s banks in recent months, concerned that Hezbollah is using them to move illicit funds derived from narcotics trafficking.

UANI has sent letters to private-equity firm Blackstone Group LP, mutual-fund firm Fidelity Investments, international bank HSBC Holdings PLC, and Germany’s DekaBank Group in recent months to lobby them to unload their Lebanese holdings.

“UANI calls on you…to divest all such securities…to ensure that you don’t unwittingly support Lebanon’s role as a sovereign money launderer,” UANI’s Chief Executive Mark Wallace wrote.

Three financial firms, Ameriprise Financial Inc., Finland’s Aktia Bank, and Vienna-based Erste-Sparinvest KAG, confirmed that they have divested themselves of their holdings in Lebanese securities in recent months, though they didn’t cite the amounts of their investments.

Ameriprise said its decision was made before receiving correspondence from UANI.

Sparinvest, however, wrote to Mr. Wallace on June 27 to confirm it was pulling its investments because of the concerns raised by the group. “We came to the conclusion to divest our holdings in Lebanese bonds, and, therefore, we will follow your recommendation,” Sparinvest Chief Executive Heinz Bednar wrote.

HSBC and DekaBank both contacted UANI and said they also were investigating the charges raised against Lebanon. Fidelity said it would comply with all U.S. regulations concerning investments in Lebanon. Blackstone said it is reviewing the matter and will respond later.

The effort to target Lebanon’s banking system is just the latest effort in a broader campaign against Iran and its allies by UANI, a group formed in 2008 by former U.S. and international security and foreign-policy officials. In recent months, the organization also has successfully lobbied South Korea’s Hyundai Motor Co., Italy’s Fiat SpA, and the U.K.’s Standard Chartered PLC to end their Iran businesses.

In another initiative, UANI teamed this year with U.S. lawmakers to pressure Belgium’s Society of Worldwide Interbank Financial Telecommunication, which facilitates financial transfers world-wide, to expel Iran from its network.

UANI also is pushing for the Treasury to designate Lebanon’s financial system as a “money-laundering concern” under a statute of the Patriot Act. Such an action could eventually bar Lebanese financial institutions from participating in the U.S. financial system.

To be sure, Lebanon poses a policy dilemma for the Obama administration. While the Treasury is focused on weakening the finances of Hezbollah, Iran and Syria, there also is a concern that Washington’s allies in Lebanon could be harmed if Beirut’s financial position deteriorates. Last year, Hezbollah formed the government in Beirut after ousting pro-Western Prime Minister Saad al-Hariri.

Last week, Treasury officials sanctioned five men for allegedly laundering drug money into Beirut on behalf of an international narcotics network run by a Lebanese national named Ayman Joumaa. The Treasury alleged that some of the funds were sent directly to Hezbollah, via a joint Lebanese-Colombian national, Ali Mohamad Saleh.

“The Joumaa network is a sophisticated multinational money laundering ring, which launders the proceeds of drug trafficking for the benefit of criminals and the terrorist group Hezbollah,” said David Cohen, the Treasury’s under secretary for terrorism and financial intelligence.

Hezbollah’s leader, Hassan Nasrallah, has denied any role in narcotics smuggling.

The Treasury last year blacklisted Lebanon’s then-eighth-largest bank, the Lebanese Canadian Bank, over charges that it was facilitating the movement of Joumaa drug money and holding accounts for Hezbollah. U.S. officials involved in the investigation said they were alarmed by the sharp increase of U.S. dollar-denominated accounts in Lebanon, which grew by as much as 500% since Hezbollah’s 2006 war with Israel. These officials said the increases raised suspicions due to the political risk associated with Lebanon and the Beirut government’s high debt load.

UANI wrote Lebanon’s Central Bank governor Riad Salameh in late May and alleged that the large cash infusions mainly were a result of Hezbollah’s smuggling. Mr. Wallace also charged that these funds were being used to artificially prop up Lebanon’s sovereign debt and securities.

“In your role as governor…under the political control of Hezbollah, it may very well be impossible for you to effectively perform your role,” Mr. Wallace wrote.

Mr. Salameh couldn’t be reached for comment. The Lebanese banker repeatedly has said that Beirut’s central bank scrutinizes all Lebanese banks to guard against any illicit funds in coming from Iran or Syria. He also said his government is cooperating closely with the U.S. in investigating the Lebanese Canadian Bank and the charges of Hezbollah’s drug trafficking.

“The central bank of Lebanon does not have any financial relationship with the central bank of Iran,” Mr. Salameh wrote to UANI. “Furthermore, none of the Lebanese banks and financial institutions has financial relationships with Iranian financial institutions.”

The Wall Street Journal

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