Hizballah's Pet Bank Gets a Ban
Lebanon prohibits transactions with al-Qard al-Hassan
Lebanon’s central bank this week banned banks and other regulated organizations from transacting with Hizballah-affiliated Al-Qard Al-Hassan Association. This is a noteworthy step for the country in which the US-designated terrorist group holds a good amount of power, and considering that the Association has been around for more than 40 years.
The Lebanese government recognized Al-Qard Al-Hassan (AQAH) as a “social” organization in 1987, and since the country’s financial crash in 2019 and the 2020 Beirut port explosion, it became a more important financial lifeline for Lebanon’s citizens by providing interest-free loans and other financial services to help clients gain access to the international financial system.
AQAH provides US dollar-denominated microloans in exchange for the equivalent in value precious metals guarantees. They apparently operate similar to any bank and even have their own ATMs.
So what’s the problem?
AQAH was designated as a terrorist organization by the US Treasury in 2007 pursuant to Executive Order (EO) 13224. OFAC in 2021 noted that Hizballah uses AQAH as a cover to manage the terrorist group’s financial activities and exploit the country’s financial system to move terrorist funds.
While AQAH purports to serve the Lebanese people, in practice it illicitly moves funds through shell accounts and facilitators, exposing Lebanese financial institutions to possible sanctions. AQAH masquerades as a non-governmental organization (NGO) under the cover of a Ministry of Interior-granted NGO license, providing services characteristic of a bank in support of Hizballah while evading proper licensing and regulatory supervision. By hoarding hard currency that is desperately needed by the Lebanese economy, AQAH allows Hizballah to build its own support base and compromise the stability of the Lebanese state. AQAH has taken on a more prominent role in Hizballah’s financial infrastructure over the years, and designated Hizballah-linked entities and individuals have evaded sanctions and maintained bank accounts by re-registering them in the names of senior AQAH officials, including under the names of certain individuals being designated today.
As other numerous Iran-supported terrorist proxies, Al-Qard al-Hassan hides behind civilians as it supports terrorism. For example, an Israeli strike last year targeted multiple branches of Al-Qard al-Hasan, including a vault used by AQAH underneath a residential building in Beirut.
Israel’s military also accuses AQAH of directly funding Hizballah’s terrorist activities including the purchase of “weapons and payments to operatives in the group’s military wing.
Hizballah is becoming weaker. This is another sign.
Hizballah has been losing money and power for several years. The Washington Institute for Near East Policy’s Matt Levitt in 2017 testified that the group experienced numerous financial setbacks, leading some US officials to describe the group as being “in the worst financial shape in decades” and forcing it to resort to online fundraising, crowdsourcing, and extorting minor payments from supporters by allowing them to avoid recruitment into Hizballah’s military wing.
Hizballah and its allies in 2022 lost their majority in the Lebanese parliament, winning 61 seats in the 128-member legislature. But despite the loss, the terrorist group still wields significant power in the country.
The ban on transactions with AQAH is just the latest hit against Hizballah. Lebanon’s Central Bank said that the decision was part of “preventive measures aimed at protecting Lebanon’s financial and economic sectors from dealing with unlicensed or internationally sanctioned entities.” Want to continue being licensed by the Banque du Liban? You won’t be transacting with AQAH.
Iran is certainly unhappy with the development, blaming the central bank’s action on US “orders” and Hizballah—or what’s left of it after Israel pounded its leadership into goo during the past year—is likely seething as well.
The move by Banque du Liban’s governor, Karim Saeid is not unusual as he is part of the anti-Resistance team. Rather, it represents a practical commitment to the demands of the U.S. spy den (embassy) in Beirut, which had a major hand in his appointment.
Iranian media claims Hizballah expected this move, and that this is just an intimidation technique against the “Resistance.”
What does the new circular say?
The Banque du Liban circular includes three organizations: AQAH, Sayyed Al-Shuhada, and Al-Imdad for Financing and Investment.
Lebanon is already on FATF’s grey list of countries with marked AML/CFT deficiencies. It’s no wonder the central bank is taking steps to mitigate the problems.
These steps include prohibitions on transactions with entities not authorized to conduct financial activities in Lebanon, whether or not they are subject to foreign sanctions. The prohibitions include:
Opening or managing bank accounts
Accessing banking or financial services of any kind
Receiving financing or conducting operations in foreign currency or Lebanese pounds
Directly or indirectly using the infrastructures of the Lebanese banking system
Using affiliated associations or entities to circumvent this prohibition
Carrying out any advertising or promotional activities in their name
Will this completely stop Hizballah from continuing its terrorist activities? Likely not.
Will it—coupled with recent OFAC designations of seven senior officials and one entity associated with AQAH—help hinder Hizballah’s financial activities and dismantle the group’s financial network?
Anything that hinders Hizballah’s financial flows is a good thing, and it almost certainly will help.
By the way…
The Banque du Liban denies reports that it had shut down AQAH and money exchanges connected to the organization.
For one, AQAH operates outside Lebanon’s official monetary and credit regulatory framework. It’s registered under the Interior Ministry, and the central bank says it lacks the legal or administrative authority to shut down the organization.
It’s also considered a nonprofit. Nonprofit and charitable entities—especially ones located in proximity to regions known for terrorist presence and activity—are often at risk for abuse by terrorist supporters and facilitators, who exploit the fact that nonprofits and charities receive funds from kindhearted donors to help those in need. In this case, AQAH is closely affiliated with Hizballah. The group doesn’t exploit the association; it uses it as a lever of soft power to gain support among the Lebanese populace and to fund Hizballah’s terrorist activities.
The Banque du Liban may not be able to shut down AQAH, but it can prohibit any financial institution or other registered entity from transacting with the group. The ban makes operating in the country more difficult and further erodes Hizballah’s capabilities.