Bankers fend off money-laundering allegations

Rating firms support sovereign outlook refuting claims of forged debt portfolio

Three rating firms have affirmed their outlook on the country’s sovereign rating last week. This shows confidence in the country’s financial system, contrary to what has been circulated lately concerning suspected money-laundering activities.

United Against a Nuclear Iran (UANI), a US-based lobby group whose board include senior former Israeli leaders such as Meir Dagan, the former head of the Mossad, and staunch pro-Israeli lobbyists and neo-conservative personalities, called on the US Treasury to designate Lebanon's financial system as a "money-laundering concern". The group claimed that the banking system is involved in money-laundering operations through the sovereign bond market. This has been refuted by the Central Bank.

“The group behind the allegations has an obvious political agenda,” said a source at the Central Bank. “Rating firms have all affirmed their ratings, which shows the accusations are unfounded,” the source said.

Fitch Ratings on Friday affirmed the sovereign rating at ‘BB’ with a stable outlook. Remittances from wealthy expatriates support banks’ liquidity, and government debt sustainability, which is vital for maintaining a stable debt ratio (currently 135 percent of GDP), and a stable rating.

Standard & Poor’s last month downgraded the outlook from stable to negative. Among the factors for S&P’s downgrade are the high public debt and large current account deficit.

This refutes UANI’s claims that rating agencies have been giving a generous rating. The group sent letters to Moody’s, S&P, and Fitch Ratings on June 12 calling on them to rerate Lebanon’s sovereigns at “no rating”. It said money-laundering proceeds are being used to prop up debt bonds, and corresponding CDS.

Banking sector officials have also dismissed speculations alluding to the involvement of the sector in illicit activities. They confirmed that the sector is “fully compliant with global anti-money laundering and terrorism financing regulations.”

Joseph Torbey, Chairman of the Association of Banks (ABL), said all transactions from abroad go through global banks. “Our banking system detects suspicious operations first because we are more cautious and more rigid in implementing anti-money laundering policies due to the circumstances surrounding us,” he said.