Lebanon’s cash economy under scrutiny: Can notaries catch suspicious funds?

Report by Bassam Abou Zeid, English adaptation by Karine Keuchkerian

The U.S. policy toward Lebanon is clear in its efforts to combat the cash economy, which facilitates money laundering and allows the financing of Hezbollah. Washington is determined not to leave what it considers loopholes that could be exploited in this context.

Based on the Notaries Law and the Anti-Money Laundering and Counter-Terrorism Financing Law, Justice Minister Adel Nassar issued a directive last week requiring notaries to verify the source of funds involved in any transaction or contract they notarize, ensure that all parties are not listed on national or international sanctions lists, and refrain from processing transactions if otherwise. 

Notaries must also notify the Justice Ministry and the Special Investigation Commission at Lebanon’s central bank in such cases.

In their first reaction, notaries said they lack the tools to verify the source of funds beyond asking clients directly, though they can report suspicious transactions after completion. They also cited logistical and practical difficulties in coordinating with the Special Investigation Commission regarding names listed on sanctions lists and questioned which types of transactions fall under the directive.

A meeting was held between the Justice Ministry and the notaries to reach an understanding over the directive. 

During the meeting, Nassar warned that Lebanon risks being placed on the Financial Action Task Force (FATF) “black list” if it fails to close loopholes in its anti-money laundering and counter-terrorism measures. 

The notaries, however, told the minister that the responsibility cannot fall solely on them, especially since they lack the proper tools to implement such oversight. Both sides ultimately agreed on steps to cooperate in enforcing the directive.

Lebanon finds itself caught between the hammer of international demands and standards and the anvil of Hezbollah’s resistance to financial restrictions. Observers say the only viable way forward may be to accelerate reforms, particularly in the banking sector, and restore its proper functioning as the most effective means of curbing the cash economy.