Watchdog FATF places Lebanon on financial crime watchlist

By Timour Azhari and Makini Brice

BEIRUT/PARIS (Reuters) -Global financial crime watchdog FATF said on Friday it has placed Lebanon on its "grey list" of countries under special scrutiny.

Lebanon has been in a financial crisis since 2019 that has been left to fester by the country's leaders and now faces growing damage from Israeli airstrikes and ground operations against Hezbollah.

Elisa de Anda Madrazo, president of the Financial Action Task Force, said Lebanon had been accorded some flexibility regarding deadlines set in its action plan, but did not provide details at a news conference.

"Of course we recognise the extreme, grave situation that Lebanon is currently facing," she said.

"Lebanon's status on the grey list should not impede relief efforts. ... We are working to make sure that channels of humanitarian aid remain open," she added.

The FATF, a 40-member organisation based in Paris, is the global money laundering and terrorist financing watchdog.

Lebanon's caretaker Prime Minister Najib Mikati said in a statement later on Friday that the country's placement on the FATF grey list was an expected move "given the known circumstances that hindered the approval of necessary financial legislations and reforms".

He said that Lebanon has made progress in implementing many recommended actions from the mutual evaluation report and will continue to cooperate with the FATF.

Mikati also said that Lebanon's relationships with correspondent banks will not be affected by this classification.

A source told Reuters earlier on Friday that the war had led the FATF to give Lebanon until 2026, instead of 2025, to address the issues that led to its grey-listing, including concerns over terrorism financing and a lack of judicial independence.

The grey-listing is likely to further deter investment in Lebanon and could affect the relationship between some Lebanese banks and the global financial system.

(Reporting by Timour Azhari in Beirut and Makini Brice in Paris; additional reporting by Tassilo Hummel in Paris and Laila Bassam in Beirut; Editing by Toby Chopra, Emelia Sithole-Matarise and Leslie Adler)