An even bigger problem, the western diplomats said, is that several countries in the region, including Bahrain and Libya, have locked arms with Lebanon in opposing international regulators’ push for a crackdown, making it all but impossible to effectively target Hezbollah’s illicit financing.
FATF declined to comment for this article.
The current battle within FATF is not centered on whether Lebanon should be on the gray list, but rather on the conditions it would have to meet to get off the list following a two-year review period, especially in relation to the role of Hezbollah in the country’s banking system.
The unregulated bank
Iran began funding Hezbollah in the 1980s — support that has enabled the terrorist group to establish a state within a state in Lebanon as it waged its battles against Israel. Despite Hezbollah’s stranglehold on Lebanon and its economy, the terror group remains heavily reliant on Iranian funding, much of which it receives in cash that it then funnels into Lebanon’s banking system.
Its main conduit is a Hezbollah-controlled financial firm known as al-Qard al-Hasan Association, or AQAH. Hezbollah relies on AQAH, effectively a bank, to pay its soldiers and other officials as well as to provide banking services to local communities.
Amid the political and economic turmoil that has plagued Lebanon in recent years, AQAH has expanded its operations to become one of Lebanon’s largest banks, with deposits estimated in the billions of dollars, western officials said.
