(Bloomberg) -- Lebanon has been added to a global financial watchdog’s so-called “gray list” denoting nations with shortcomings in tackling illicit financial flows, a move that may worsen the Middle Eastern country’s economic crisis.
The decision was announced by the Paris-based Financial Action Task Force on Friday. The designation would add to the hurdles for a nation that first defaulted on debt payments in 2020, and is grappling with a financial meltdown that pushed three quarters of its population into poverty.
The escalating military clashes between Hezbollah and Israel are adding to Lebanon’s challenges. The Iran-backed militia, designated as a terrorist group by the US, began firing almost-daily salvos of missiles into Israel more than a year ago.
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Apart from Lebanon, Algeria, Angola and Ivory Coast have also been added to the list of jurisdictions subject to increased monitoring, while Senegal has been removed from the gray list.
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Bloomberg News had reported last week that Lebanon is poised to get added to the FATF’s gray list while Senegal is close to removal from the table of nations subject to increased monitoring.
FATF’s recommendations are taken seriously because no nation wants to be flagged for deficiencies that might cast doubt on the integrity of its banking system. Countries added to the gray list require closer monitoring and the designation can make foreign investors more wary of doing business there.
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Lebanon’s central bank Governor Wassim Mansouri said in August that the economic crisis had bred mistrust among depositors, spurring a shift to a “cash economy” that undermines progress made in combating money laundering within the banking sector. In response, the Banque du Liban had enhanced monitoring of financial operations, according to Mansouri.
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