(Bloomberg) -- Lebanon, already locked out of global debt markets, is expected to be added to a watchdog’s “gray list” for shortcomings in tackling illicit finance.
The Paris-based Financial Action Task Force is poised to put the Middle Eastern nation on its list as early as Oct. 25, the final day of its plenary in Paris, according to people familiar with the matter, who requested anonymity as the plans are private. No final decisions have been made.
The gray-list designation would add to hurdles for a nation that first defaulted on debt payments in 2020, is grappling with high inflation and has been functioning without a president at the helm.
Lebanon is also contending with Israeli troops moving into the south of the country and airstrikes throughout the nation as Israel seeks to diminish the threat posed by Hezbollah. 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. Israel’s offensive has so far killed hundreds of people and caused more than a million to flee their homes, according to the Lebanese government.
A spokesperson for the FATF declined to comment, citing the confidential nature of the discussions. Lebanon’s central bank didn’t respond to a request for comment.
Gray-listed countries experienced “a large and statistically significant reduction in capital inflows,” according to a 2021 International Monetary Fund report. That classification isn’t as punitive as the black list and would suggest that Lebanese officials are taking some steps to address current shortcomings, people familiar with the matter said.
To avoid the designation, a significant majority of the FATF’s members must agree that a country has made sufficient progress since the start of the evaluation period. Just a few votes to the contrary can lead to inclusion on the list of nations under increased monitoring, the people said.
The FATF counts roughly 40 members, though its imprint is much wider. The group’s rulebook for tackling money laundering and terrorist financing applies globally. Founded more than three decades ago at the initiative of the G7, its members include the US and China as well as the European Commission and the Gulf Cooperation Council.
The group’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.
Those added to the gray list require closer monitoring and the designation can make foreign investors more wary of doing business there. It currently includes about 20 countries spanning several continents on the gray list, including Monaco, Nigeria, South Africa, the Philippines and Venezuela.
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