Lebanon’s Central Bank (Banque Du Liban or BDL) issued a circular on July 15 that effectively banned Lebanese financial institutions from dealing with Al Qard Al Hassan (AQAH), Hezbollah’s de facto banking and loans institution. BDL’s move is a step in the right direction for a country that has long suffered from financial corruption and economic stagnation, and whose massive shadow economy is a terror financing hub. However, the move’s impact is likely to be largely symbolic, and more is required of Beirut to curb Hezbollah and its finances.
The BDL Circular
The BDL’s circular prohibits, effective immediately, Lebanese banks, brokerages, and other financial institutions licensed by the central bank from dealing with entities that are either unlicensed or subject to foreign sanctions. Critically, the BDL circular listed several Hezbollah financial entities as examples of such institutions, including previously sanctioned entities such as Bayt Al Mal, Tashilat SARL, Yousser Company and, most significantly, AQAH.
Among other legal authorities, the circular relies on Lebanon’s 2015 anti-terror financing law and BDL’s 2016 compliance circular for Washington’s Hizballah International Financing Prevention Act (HIFPA). Violators of the circular can have their BDL license suspended or withdrawn, have their accounts or assets frozen, or be referred to a special investigations committee.
AQAH’s Indirect Relationship With the Lebanese Banking and Financial Sector
AQAH was founded in 1982 and received a license from the Lebanese Ministry of Interior in 1987 to operate as a social welfare organization focusing on humanitarian work. It has since become Hezbollah’s savings and loans arm, providing interest-free loans against collateral or guarantees by third parties. Its role as Hezbollah’s de facto banking arm became more prominent after Lebanon’s 2019 economic collapse, when government measures blocked depositors from accessing their funds in Lebanese banks.
AQAH operates outside Lebanon’s official financial and banking system, with only indirect ties to Lebanese banks. This is partially what allowed AQAH to avoid the banks’ fate in 2019. However, several Lebanese banks maintain personal accounts for known AQAH employees. Those accounts may serve as de facto AQAH correspondent accounts, granting AQAH, a sanctioned entity, otherwise prohibited access to the international banking system through those banks’ foreign ties.
BDL’s Circular is Largely Symbolic but Nevertheless Significant
BDL’s new guidelines will impact Hezbollah to the extent that they prohibit AQAH employees from maintaining accounts in Lebanese banks. Even so, because AQAH operates in Lebanon’s shadow economy, the overall impact on the group’s finances or AQAH’s operations could be minimal.
BDL’s move is nevertheless significant. Lebanon is one of the world’s most corrupt countries, making Hezbollah’s carefully crafted image of incorruptibility a major draw of popular support. That is why former Secretary-General Hassan Nasrallah routinely used his bully pulpit to adamantly deny the group’s involvement in facilitating or profiteering from drug smuggling.
BDL’s measure will contribute to tainting that image. The circular listed only Hezbollah-linked institutions as examples of entities with which Lebanon’s anti-terror financing laws prohibit Lebanese financial institutions from dealing. This promotes a Lebanese-made linkage between the group and terrorism, beginning to paint Hezbollah with a domestic image of illegality that could damage, over time, the perception of the group among its broader support base.
The U.S. Should Press Lebanon to Follow Up with More Concrete Measures
Symbolic moves, however, could take years if not longer to produce results — a delay which provides Hezbollah with ample opportunity to push back on the measure or build an effective counternarrative. The United States must help advance BDL’s initiative by expanding its July 3 sanctions on AQAH figures to include the dozens of known current or former AQAH employees. Washington must also press the Lebanese government to follow up on the central bank’s measure by pulling AQAH’s operating license and clamping down on all entities operating within Lebanon’s shadow economy as a precondition to any economic assistance to Beirut.