Gulf news by Joseph A. Kechichian, Senior Writer – Beirut: At a time when 77 per cent of all Lebanese claimed that their
financial situation deteriorated over the past six months — according
to a Byblos Bank/AUB Consumer Confidence Index — Central Bank Governor
Riad Salameh has stressed that all local banks would abide by the latest
Office of Foreign Assets Control (OFAC) of the US Department of
Treasury rules, even as he requested justifications before suspending
accounts suspected of belonging to Hezbollah operatives.

“The law
issued in the United States is an American law that is supposed to be
implemented globally and in Lebanon, and, accordingly, Memo 137 that was
issued by the Central Bank on May 3, 2016 was a Lebanese legal
obligation,” Salameh declared in a formal statement issued on Tuesday.
This was more than a technical concern because “Article 70 of the
Monetary and Credit Act required the Central Bank to ensure credit
stability [which] cannot be secured without implementing this US law.”

It
was for this reason, Salameh clarified, that the Lebanese Central Bank
issued Memo 137. In turn, this legal step aimed to channel complaints
lodged against local banks, which would henceforth deal with the Central
Bank to fulfil any international obligation. The nuance was critical
precisely to prevent a huge risk that could, potentially, isolate
Lebanon’s vital banking sector, a pillar of the economy.

The issue
surfaced after the Minister of Industry, Hussain Hajj Hassan, warned
the cabinet last Thursday that a “red line” had been crossed after two
Lebanese banks suspended three Hezbollah-linked accounts in conformity
with the US sanctions law. Hajj Hassan, a Hezbollah member, reported
that two unnamed Lebanese banks suspended the accounts of two deputies
as well as the account of a former parliamentarian’s daughter. He
hammered that “the US sanctions shall not pass” that, to put it mildly,
was an open threat.

Caught between indigenous political
requirements and global fiduciary obligations, Salameh pointed out that
“except for accounts belonging to individuals or firms blacklisted by
the Office of Foreign Assets Control,” which named Hassan Nasrallah,
Mustafa Badr Al Deen and others, banks seeking to suspend accounts must
justify the frequency of suspected transactions associated with a
particular account and must coordinate with the Central Bank for each
step they choose to take.

Whether these procedures were delaying tactics were impossible to
determine although Salameh, along with senior Lebanese government
officials recognised that there was no way to neglect suspected
accounts, lest the entire banking system suffer. Prime Minister Tammam
Salam was empowered to coordinate the issue with the Central Bank
Governor as well as Minister of Finance Ali Khalil Hassan, who was fully
briefed by US Treasury officials in Washington during his most recent
sojourn to the American capital as to what to expect in case of
non-compliance.

Hezbollah insisted that the Central Bank and
private banks that applied the sanctions would be participating in “a
war of exclusion” against the party by upholding this law, though
Salameh reiterated that the bank would abide by the restrictions in the
December 2015 Hezbollah International Financing Prevention Act.

Failure
to abide would have immensely negative consequences since US
regulations were geared to target any individual or institution that
“knowingly facilitated a significant transaction or transactions for”
Hezbollah or any individual, business or institution linked to the
party. Daniel Glaser, the Assistant Secretary for Terrorist Financing at
the US Treasury, reiterated his government’s policies during his most
recent visit to Beirut a few days ago, and insisted that Washington
would monitor any and all transactions undertaken by Hezbollah
operatives before taking appropriate actions. Bankers feared that
international transactions, including wire transfers in any currency,
would be significantly delayed.

Secretary-General Hassan Nasrallah
insisted in 2015 that his group would not be affected by the law,
presumably because it did not deal with Lebanese or even foreign banks,
though thousands of Lebanese individuals and many organisations
associated with the party were not so lucky.