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Hezbollah takes aim at Lebanese finance

Hezbollah

Hezbollah, a Shiite political party and militant group, has long held great leverage over politics and business in Lebanon. But now the group, which is on several lists as a terrorist organisation, is taking aim at control of the country central bank (Banque du Liban) and with it the nation’s financial life.

The current battle is over US sanctions, which have caused the closure of hundreds of Hezbollah-linked accounts threatening the militia’s social support network.

Two banks close to the group have also been closed since sanctions were imposed in 2014 with the passage of the law “Hezbollah International Financing Prevention Act” (HIFPA). The law targeted money laundering and this hit many of Hezbollah’s operations.

One would expect a pro-Hezbollah central bank governor to simply refuse to implement compliance requests from the US, let alone any requests that have to do with sanctions on the Iranian- backed militia. A Hezbollah-controlled central bank governor  would affiliate Lebanon with the Iran-axis, turning what is left of the Lebanese economy into a safe haven for money laundering and military funding activities that Hezbollah has relied on in Africa and Latin America.

Hezbollah partisans have targeted the Central Bank of Lebanon on many occasions in 2019 and 2020 with Hezbollah-linked demonstrators trying to storm into the bank building, and calling out for the governor’s resignation.

So it is not surprising that Hezbollah is today trying to oust Riad Salameh, governor of the Banque du Liban since 1993.

Hezbollah’s long history of conflict with Banque du Liban

In an interview with the Cyprus Mail, the former Vice-governor of the Central Bank Muhammad Baasiri explains:” If we consider that Hezbollah has been under US sanctions for many years, and when we take into account the critical requirement of the central bank and banks to enforce such sanctions, one would conclude that any relationship that may exist between the two would be characterised as strained and ultimately leading to conflict.”

Muhammad A. Baasiri

Muhammed Baasiri

Baasiri who left his role as a vice-governor of the Banque du Liban in 2020, was himself entangled in the undeclared power-struggle with Hezbollah.

The last Lebanon government of Hassan Diab – currently operating as caretakers ahead of the formation of a new government — who represents Hezbollah and its allies, had taken the decision to remove Baasiri from his position. At the time the move was seen as a way to attack the governor as a next step.

Baasiri’s role was to coordinate between the central bank and specialised US authorities.

“My departure may have been perceived as such. For Hezbollah perhaps I was considered ‘a US deposit at the central bank.’”

Diab’s government decided against renewing the term of all the vice-governors.

Possibly, by appointing a new team, the government may have thought the central bank’s powers, and those of the governor, could be curtailed.

“Not understanding the governing law, and not privy to the decision-making process at the central bank, the government could have been under the impression that my colleagues and I served as rubber stamps for the governor.” Baasiri explains.

Next step is to oust the governor

The next step for Hezbollah today is to seek to oust the central bank governor, who has also been instrumental in implementing US sanctions.

Salameh is under heavy pressure, in any case, from Lebanon donor states. He is blamed for his role in Lebanon’s financial collapse in 2019 that lead to the devaluing of the Lebanese pound and the government’s default on sovereign debt.

There have been calls for an audit of the central bank from France, and an investigation of the governor is underway in Switzerland.

The battle between the BDL and monetary institutions has taken on many forms, explains Jessy Trad a Senior Economic Analyst who has followed the struggle very closely over the years.

Last January the name of the governor was brought up by the Swiss federal prosecutor’s office that has opened an investigation into “aggravated money laundering” and “possible embezzlement” at the crisis-hit Lebanese Central Bank. Salameh has not been charged with anything in Switzerland, however.

Pro-Hezbollah media has used these accusations as a means to build up resentment and to engineer charges against Salameh at a Lebanese court.

In Beirut, the Hezbollah-affiliated Al- Akhbar newspaper has kept its pages full of accusations and innuendo about Salameh.

“Notwithstanding the fact that I do not speak for Salameh, nor do I want to play the role of his defence attorney, as a former vice-governor of the central bank, I find the rumours spread about him groundless and utterly unreasonable,” Baasiri comments.

Another analyst agrees: “The financial and economic collapse in Lebanon made the governor an easy target for the growing militia which is seeking to control monetary policy in Lebanon and to unlock the grip of the US sanctions on its financial operations,” comments Jessy Trad, a senior economic analyst who has followed the struggle very closely over the years.

“The forensic audit, the rumours that were added to inflate the facts about the Swiss investigation and the local prosecution of the governor are part of Hezbollah’s ongoing war to bring down the system and gain power over the financial institutions,” she adds.

Hezbollah’s ‘Black Bank’

Hezbollah already maintains a ‘shadow bank,’ meaning an unlicenced organization that effectively lends money and holds deposits. This organisation which is called  “Al kard el hassan,” (the Good Loan) was established in 1982 and has been growing very rapidly in the last couple of years, especially after Hezbollah bank accounts were closed.

It is officially an NGO, distributing charitable funds. But, when the  the US Treasury department included “AL-kard al Hassan” (The Good Loan) in its sanctions list its true purpose became clear. It makes short-term loans, and clients repay them with a monthly “contribution.”

This led a group of hackers to gain access to the organisation’s database revealing that it catered for no less than 300,000  clients who are all Hezbollah members or affiliates. They were all exposed by name.

In November 2018, the association established an account to transfer donations to the Houthis in Yemen.

In April 2019, two other accounts were opened to transfer donations to flood victims in Iran to the Iranian Red Crescent and the Hezbollah Supply Association. The association was even involved in military funding.

With people’s money locked up in banks due to capital control the number of clients has increased for Hezbollah’s “Black Bank.”

“The central bank today is the last place where Hezbollah’s dominance has not been established. They are trying, day-by-day, to make that official,” Trad concludes.

 

 

 

 

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