When Abdul Hafiz Mansour says 2011 was an “active” year, he leaves the impression that an off-the-record interview would yield a coarser word choice. As the “Secretary” of the Bank du Liban’s Special Investigation Committee (SIC), Mansour has the task of rebuilding confidence in the Lebanese banking sector’s ability to deal with money laundering, following the Lebanese Canadian Bank (LCB) crisis in early 2011. Along the way he has faced constant pressure from American authorities, including new legislation that could undermine Lebanon’s banking secrecy, and a slow-moving Lebanese legislature that has stalled implementation of laws conforming to international banking standards.
He believes the LCB crisis that began in February 2011 when the United States Department of the Treasury labeled LCB as ‘non-compliant’ is finally over.
But Executive notes that critics have raised concerns about the process by which many of LCB’s assets were acquired by Societe Generale de Banque au Liban (SGBL), with a number of ‘suspect’ accounts being allowed to remain.
Mansour defends the plan for the accounts as “well defined” and promises the Lebanese central bank is watching them closely. “Those accounts [that SGBL] did not take, we know where they were transferred eventually and we follow those accounts just like the banks that acquired them… there is nothing wrong with those accounts,” he says, but declines to discuss specific accounts.
Loads of laundry
In 2010, the SIC only dealt with 254 investigations. When it was setup in 2001, the SIC published the actual dollar figures involved in reported cases and the sums that were frozen: $5.2 million out of a total $18.8 million. Since then it has stopped publishing these figures, thus reducing transparency and the ability to gauge the SIC’s productivity. Mansour says that because these figures represent a “moving target” during an investigation, reporting amounts is a frivolous exercise.
Mansour admits that due to unusual circumstances last year the number of cases the SIC dealt with may be higher. But that figure is likely to grow exponentially once new rules are implemented.
Following the LCB scandal, the SIC took aim at currency exchange with a series of new measures, including higher capital thresholds. Mansour concedes that this will mean much stronger regulation on an industry of 400 businesses without any significant new allocation of resources — a seemingly daunting task, especially outside of Beirut. Yet he insists the SIC is prepared to take on this role.
“Lebanon is very well equipped, the SIC is very well staffed. I don’t like to name and cite other countries but certain countries with populations and banking sectors much bigger than Lebanon… don’t have as big an FIU [Financial Investigation Unit],” he says. Lebanon’s SIC has a staff of around 40, while Russia has some 600 and Saudi Arabia having roughly 110.
Last month Executive revealed that adapting to the US FATCA declarations on tax evasion could require a change to Lebanese banking secrecy laws, with Law 318 that created the SIC having to be amended to include tax evasion as a money laundering crime. The government and the central bank have yet to confirm this, but Mansour admitted it would be necessary to remain compliant.
These changes could threaten remittances, which are more than a fifth of gross domestic product, but Mansour disagrees, pointing out that the same fears were raised when the SIC was created in 2001, yet the financial sector continued to grow.
“It will be recommended that tax evasion would be a predicate offense…under the umbrella of anti-money laundering laws. So if you committed tax evasion all the monies that [are] involved in it will be considered as falling under the anti-money laundering rules,” he says, adding that corruption and politicians’ accounts will also be covered.