by H. Varulkar and E. B. Picali
If Lebanon's banking sector does not comply with the law it will be barred from the global financial system, which could bring about its collapse
The Hizballah International Financing Prevention Act, passed by the U.S. Congress in December 2015, is aimed at curtailing the organization's funding of its domestic and international activities, and also at combatting its global criminal activities – including money laundering, drug trafficking, and human trafficking – by which it funds the terror operations that it carries out worldwide. It bars any "foreign financial institution" that engages in transactions with Hizbullah or with persons or bodies affiliated with it, or which provides them with financial services or launder money for them, from maintaining a relationship with the U.S. banking system. This means that any bank in the world, including in Lebanon, that provides financial services to the organization will be denied access to U.S. financial institutions – and thus to the global financial sector. The ramifications of this are far-reaching and can lead these banks to collapse. The law also imposes sanctions and penalties (fines, imprisonment or both) on individuals or bodies that violate its provisions. It came into effect on April 15, 2016, after the U.S. Treasury issued regulations for its implementation; the Treasury also published a list of some 100 bodies and figures associated with Hizbullah with whom financial institutions may not conduct dealings.
Since Congress passed the law, Hizbullah has been perturbed and apprehensive about its ramifications and the impact it would have on its operation. This has been expressed both in statements by Hizbullah officials and in articles in the Lebanese press, especially the press close to Hizbullah. In a speech a few days after the law was passed, Hizbullah secretary-general Hassan Nasrallah exposed his concern, by warning Lebanon's banks not to "submit to the will of America."
In early May 2016, two weeks after the law went into effect, Riad Salameh, governor of the Banque du Liban (BDL), Lebanon's central bank, stressed, in a directive to Lebanon's banks, the need to fully comply with the law. Following this, Lebanese banks began to close accounts of Hizbullah officials and their family members, and it has been reported that dozens such accounts have already been closed. Hizbullah reacted with a campaign of severe criticism against Salameh and the Lebanese banking system, accusing them of "surrender[ing] to the American financial mandatory authority in Lebanon and warning that this would bring about the collapse of Lebanon's currency and lead to "complete chaos" in the country. Hizbullah ministers argued that the banks had crossed every red line, and other Hizbullah members leveled threats against the banks.
These reactions clearly indicate the scope of Hizbullah's fears about the U.S. law and its ramifications. It should be noted that in recent months Hizbullah has also been the target of sanctions by the Gulf states and several other Arab countries, which have designated it a terror organization and have begun expelling its operatives from their territory.
It should further be noted that it is not only Hizbullah that is concerned about the U.S. law, but also Lebanon's banking sector, because if it does not comply with the law it will be barred from the global financial system, which could bring about its collapse. In light of these concerns, two Lebanese delegations were recently dispatched to the U.S., one on behalf of the Lebanese parliament and the other on behalf of the Association of Banks in Lebanon. The aim of the visits was to meet with U.S. Congress and Treasury officials and to discuss the law and its implementation, and perhaps also persuade them to soften the language of the law and provide guarantees for the Lebanese banks' stability.
This report will review Hizbullah's apprehensions about the U.S. law as well as the organization's threats to the Lebanese banking sector, the Lebanese government, and the U.S. following the law's passage by Congress, and the intensification of these threats since the Lebanese banks began implementing the law.
Following Congress's Passage Of The Law, Nasrallah Warns Lebanese
Government, Banks Not To Comply
On December 21, 2015, three days after President Obama signed the act into law, Hizbullah secretary-general Hassan Nasrallah claimed that the law was part of the U.S. war on his organization that it declared years ago. In an attempt to downplay the importance of the new sanctions, Nasrallah argued that they would have no impact. He added that ever since the U.S. designated Hizbullah a terrorist organization in 1995, it has been trying to force the rest of the world to accept this designation, but to no avail; he added that since it failed in this attempt, it is now making false accusations against the organization. "The Americans," he said, "are trying to pressure Hizbullah again with a decision they issued, according to which it is a criminal organization, and they are accusing us of drug trafficking, human trafficking, and money laundering. This is not true. These accusations are unjust, and we are not interested in presenting proof of our innocence, because the accuser is the one who should be presenting proof... This is a political accusation, part of a political, security, and military campaign in the region, aimed at tarnishing Hizbullah's image in the eyes of the peoples of the world... It is part of a psychological war that will not succeed."
As part of his attempts to reassure Hizbullah's supporters and to convince them that the sanctions would have no impact, Nasrallah stated that his organization holds no accounts in Lebanese banks, nor any investments in or partnerships with Lebanese companies or merchants – and that therefore neither the BDL nor any other Lebanese bank has any cause for concern. At the same time, he revealed his concerns when he said: "The minute the U.S. gives the signal to harm some sector or political stream, some Lebanese banks will begin settling scores [with that sector or stream]." He declared that this would be "unacceptable" and warned the government and the banks against "obeying the American will." He claimed that these American sanctions were aimed not just at Hizbullah but at Lebanon's citizens, companies and businessmen, and demanded that the Lebanese state defend them: "We do not want the state to defend Hizbullah and its operatives, its sons and its daughters. We are defending ourselves and know how to do so. But the state must have people to defend any individual that the Americans wish to accuse."
Hizbullah Faction In Lebanese Parliament: American Law Will Spur Hizbullah To Act Against U.S.'s "Terrorist Branches" In The Region
On December 24, 2015, several days after Congress passed the law, the Hizbullah faction in the Lebanese parliament harshly criticized the U.S. over it, saying that "arrogance and terrorism" were behind the decision targeting Hizbullah, its supporters, and "ostensible organizations and elements working with it". This, it stated, confirmed that the U.S. administration is indeed "the Great Satan." The faction also said that the law "would spur Hizbullah to continue its actions against the American takeover plan and to continue resisting its terrorist branches, represented by the Zionists and takfiris, in Lebanon and the region."
Hizbullah-Affiliated Daily: Sanctions Could Lead To Intra-Lebanese Tension
Additionally, on March 31, 2016, the Lebanese Hizbullah-affiliated daily Al-Akhbar published an article implicitly warning that the U.S. law would destabilize Lebanon: "As the countdown to the release of the regulations for implementing the American anti-Hizbullah sanctions begins, the fears that the [Lebanese] domestic arena will be impacted by it and its ramifications are revived... as have fears that this issue will become volatile..."
The article also outlined the assessments that the sanctions and the anticipated regulations for their implementation will be harsh and will cover a broad range of individuals and political, financial, and media institutions, and added that if this proves to be the case, "it could constitute a worrisome factor that could stoke domestic tension [in Lebanon, especially] in everything connected to Hizbullah's reaction to the attempts at besieging it..."
On April 11, 2016, the U.S. Treasury Department released the regulations for implementing the Hizballah International Financing Prevention Act; they included details for applying the sanctions as well as a list of 99 Hizbullah-linked individuals and institutions with whom banks and financial institutions worldwide may not conduct business. The law, which as mentioned came into effect on April 15, 2016, is binding on all the world's financial institutions, including Lebanese banks.
BDL Governor Salameh Orders Lebanese Banks To Comply With U.S. Law, Enraging Hizbullah
On April 28, 2016, the governor of the Central Bank of Lebanon, Riad Salameh explicitly stated, on the Lebanese LBC TV channel's show Kalam Al-Nas, that Lebanese banks must comply with the U.S. law. He stressed: "The American law cannot be circumvented, because the regulations for its implementation include all currency, including the Lebanese lira." The BDL, he said, would issue a statement emphasizing that Lebanon was committed to complying with the law and would hold banks responsible for implementing it. He added, "This will be clear and there will no way to get around it. This is an official and legal position. The banks must align with us."
A few days later, on May 3, 2016, Salameh issued guidelines requiring "all banks in Lebanon and all institutions under the oversight of the BDL" to comply with the law and to immediately inform the BDL of any freezing or closure of any account, or of any refusal to open any account, and to state their reasons for doing so. According to reports in the Lebanese press, Lebanese banks have begun implementing these guidelines, and have already closed dozens of accounts belonging to Hizbullah MPs and associates. Salameh's guidelines sparked enraged responses from Hizbullah.
Riad Salameh (nna-leb.gov.lb, April 4, 2016)
Hizbullah MP: U.S. Is The Great Satan, We Must Resist Its Plans In The Region
Hizbullah MP Hussein Al-Moussawi threatened the U.S., saying: "The U.S. is still the leader of the camp of lies, and, as the Great Satan, it attempts to give the resistance a satanic image, and marginalize it with terrorism accusations and economic sanctions... The sons of the ummah should be wary of the American plans and carry out resistance against them."
Hizbullah: Salameh Surrendered To "The American Financial Mandatory" Rule In Lebanon; Implementing This Law Will Lead To Chaos In The Country
After Lebanese banks began closing the accounts of Hizbullah affiliates, the organization launched criticism not only at the U.S. but also at the Lebanese banking sector. On May 12, 2016, the Hizbullah faction in the Lebanese parliament issued an exceptionally harsh statement against Riad Salameh, noting: "The recent American law, which forces Lebanese banks to comply with its sections, is completely unacceptable because it will form the basis for a local war of exclusion, which the central bank and other banks are helping to stoke. This is in addition to the fact that complying [with the U.S. law] constitutes an appropriation of Lebanese financial sovereignty."
The statement also said: "The orders recently published by BDL governor Riad Salameh... are a form of unjustified surrender to the American financial mandatory authority in Lebanon – which could exacerbate the financial crisis in the country, lead it to bankruptcy because of the ramifications of the deep schism [that could come about] between the Lebanese and the banks, and place the country on the brink of a grave currency collapse in the country and complete chaos that will be unstoppable." The announcement also called on the governor "to reexamine the recent guidelines, such that they will be compatible [with the principle] of national sovereignty," and on the government "to take the necessary steps to prevent the dangerous ramifications that are likely to emanate from this."
Hizbullah-Affiliated Daily: Hizbullah Is Furious At BDL Governor For Reneging On Understandings It Reached With Him
The Lebanese daily Al-Safir, which is close to Hizbullah, revealed on May 13, 2016 that the reason for Hizbullah's fury at the BDL governor is that the guidelines he issued for the banks effectively countermanded previous understandings at which he had secretly arrived with Hizbullah, that were meant to mitigate the impact of the sanctions. According to the report, former Hizbullah MP Amin Shiri had concluded with Salameh that the Lebanese banks would not decide independently on the closure of any Lebanese citizen's bank account, but would obtain Salameh's personal approval beforehand. They also agreed that the banks would allow any citizen, including Hizbullah members, to open an account in Lebanese lira. However, the new guidelines that Salameh released in early May contradicted these understandings; under the new guidelines, banks should close accounts on their own and then inform the BDL, and must prevent Hizbullah members from opening accounts in Lebanese lira –because the American regulations for implementation specifically bar opening accounts in any currency.
According to Al-Safir, Hizbullah was surprised, and enraged, by Salameh's guidelines. It quickly tried to contact him, but after receiving no persuasive answer, it decided to publish the harsh statement against him, and to raise the issue in the upcoming cabinet session.
The daily Al-Akhbar, which is also close to Hizbullah, added that the organization had sent a message to Salameh claiming that "some banks decide for themselves to go too far in implementing the American sanctions, punishing Lebanese [citizens] that the U.S. did not even seek to sanction." The daily added that Hizbullah had told Salameh that it would not allow the Lebanese banking sector "to act purely as the executive arm of the American administration [in carrying out its] decisions."
Al-Safir: Lebanese Elements, Saudi And UAE Foreign Ministers Worked To Step Up The Sanctions
Al-Safir reported that several MPs, apparently from Hizbullah, had complained to parliament speaker Nabih Berri that the regulations for implementation released in April by the U.S. Treasury Department had included new sections that were not in the law itself – for example, that the sanctions apply to all currencies, not only to U.S. dollars. They argued that these additions undercut the understandings between Hizbullah and Salameh, which were aimed at circumventing the sanctions and mitigating their effects. The MPs argued that an apparent "Lebanese element... leaked these [Hizbullah-Salameh understandings]." The daily cited sources as saying that "there is an Israeli-Lebanese-Arab lobby operating daily in Washington under the direct supervision of the office of Saudi Foreign Minister 'Adel Al-Jubeir and the office of UAE Foreign Minister 'Abdallah bin Zayed," and adding that UAE Ambassador to Washington Yousef Al-'Otaiba is working hard on this matter in Congress and the Treasury Department.
Hizbullah Ministers: Lebanese Banks Have "Gone Too Far" In Implementing The American Law"; This Crosses All Red Lines
On May 12, 2016, the same day the Hizbullah faction in the parliament issued its statement against the Lebanese banking sector, Hizbullah ministers raised the issue in the cabinet session. The Al-Akhbar and Al-Safir dailies reported that Hizbullah ministers in the unity government, Hussein Al-Hajj Hassan and Muhammad Fneish, had delivered scathing attacks on the Lebanese banks, saying that they had "gone too far in implementing the American law" and had begun "taking steps against people with no ties to Hizbullah other than familial ties to organization officials."
At the meeting, Hizbullah ministers claimed that one bank had closed the account of the daughter of a former Hizbullah MP. Al-Hajj Hassan claimed that banks had also recently closed the accounts of MPs Nawar Al-Sahili, 'Ali Fayyad, 'Ali Ammar, and 'Ali Al-Miqdad, as well as that of former MP Amin Shiri. Also closed, they said, were accounts belonging to various cultural, religious, healthcare, and societal institutions, as well as charity organizations; he also expressed apprehension that the accounts of dozens of local municipalities would be closed "on the pretext that they [are administered] by Hizbullah members." It was also reported that during the meeting, other ministers who are not members of Hizbullah related how U.S. and French banks had refused to open accounts for them and also closed their existing accounts.
According to Al-Hajj Hassan, these closures constituted "a serious attack that crosses all red lines," especially since the law harms all Lebanese, not just one group or sect. Other reports in the Lebanese press noted that Al-Hajj Hassan had issued threats, and had said that the BDL guidelines and the conduct of the banking sector had "crossed the red line and reached the black line, and Hizbullah will not agree to this, and the American sanctions will not be allowed to pass." It was also reported that Hizbullah ministers had called the Lebanese banks' implementation of the U.S. law submission to aggression, and added that there must be no silence over this law, "because the occupation is not only military, but also financial, political, and cultural."
Al-Safir reported that some ministers from the March 14 Forces, the rival bloc in the unity government, were claiming that Hizbullah had brought this situation on itself, and that the resistance had become a weak point for Lebanon, not a source of strength. Furthermore, one minister argued that Hizbullah ministers could not shift responsibility to the Lebanese banks or the BDL governor, since no one in the world can confront the U.S. The cabinet meeting ended with a decision by Prime Minister Tammam Salam and Finance Minister 'Ali Hassan Khalil to meet with Salameh to discuss the matter and update the government on the results.
Hizbullah Sources Threaten: Hizbullah Won't Remain Silent – We Will Upend Everything
On May 14, 2016, the Lebanese daily Al-Nahar quoted sources in the Hizbullah-headed March 8 Forces as saying that the organization would not remain silent about the new guidelines released by Salameh, and that it would not back down from its demand that they be cancelled. The sources argued that the banks were implementing the sanctions also against people who were not on the U.S. Treasury Department list, only because they were Shi'ites or relatives of a Hizbullah member. They added: "How is it possible that the bank accounts of MPs representing the Lebanese people are being closed – how will they receive their salaries?"
Hizbullah maintained that the BDL and the other banks are going beyond what the Americans are demanding in their implementation of the sanctions, and thus are strangling an entire community. The sources said: "When [Hizbullah] asked the BDL governor about the implementation of the U.S. law, he said nothing about what he is implementing today, but [said that there would be] an investigation and an examination of every account about which there are doubts... But closing the accounts of innocent people who have no connection [to Hizbullah] without any investigation or examination [as is happening right now] – that is a dangerous sign of concessions on Lebanese sovereignty and of punishment of the Lebanese people by the state, which we will in no way allow to happen." The sources argued that the government must "cancel the BDL's guidelines, otherwise [Hizbullah] will react not only by thwarting the government['s activity] but will upend everything, and will open the file of the banking sector from the 1990s onward..." – hinting that Hizbullah has information on improper conduct by the banks.
Asked what was meant by the term "upend everything," the sources quoted a hadith attributed to Imam 'Ali bin Abu Taleb, the fourth caliph: "I am amazed how a poor man who lacks a crust of bread does not go out and brandish his sword at the people" – hinting that Hizbullah's reaction will be harsh.
Nasrallah: We Face A Challenge To Obtain Monetary Aid – "We Will Be Grateful For Every Donation"
Hizbullah officials' threats and harsh reactions clearly attested to the distress and pressure felt by the organization, and to the scope of the sanctions' impact on its activity. Additional evidence of this could be found in a May 6, 2016 speech by Nasrallah following the release of the regulations for implementing the U.S. law.
In his speech, Nasrallah reiterated, as he had first stated in his December 2015 speech, that the sanctions would do little damage to Hizbullah because the organization was accustomed to such pressure and that it would overcome it as it had in the past "under much worse circumstances." But despite Nasrallah's efforts to convey the message that Hizbullah was just fine, the scope of the economic damage done to the organization came through in his statements, in which he noted, inter alia, that the Islamic Resistance Support Organization was now playing a vital role in financially helping the organization. He even personally appealed to the public of supporters of the resistance for monetary donations, no matter how modest:
"I want to talk about this point openly, so that the people will also know how we think and operate. We first of all consider the importance and real value of the intention of the donors, not the size of the contribution... The families of the martyrs donate, the wounded donate, the people donate, the elderly lady who saved for her old age gives a little of her savings to the resistance, the boy who is in school takes some of his allowance and drops it into the cashbox of the resistance. This, for us, is worth millions. This is the real support for us...
"Therefore, today, when we stand before America's, Israel's, and Saudi Arabia's attempts to dry up our sources of funding, we must realize that the sums donated by this or that family via the the Islamic Resistance Support Organization, even if modest, are in fact very large and extremely valuable sums. Obviously, we do not want to embarrass anyone... [so that they will] donate to us, but we trust the faith, the insight, and the reliability of all those who donate to us, since they are the people with whom we have, together, [overcome] the most difficult of days and circumstances, and the most dangerous of challenges and hardships. With them, we have completed the path; we have triumphed, and passed through all the difficult stages; with them, we will pass through all the difficult stages to come, Allah willing."
In an attempt to reassure the resistance-supporting public, he added that they must not worry, because Iran would continue to send economic, material, and military aid to Hizbullah despite the pressures and threats against it as well.
*H. Varulkar is Director of Research at MEMRI; E. B. Picali is a Research Fellow at MEMRI.
 On Hizbullah's involvement in global drug trafficking, see MEMRI Inquiry and Analysis No. 1227, Hizbullah's International Drug Network Preoccupies Europe, February 9, 2016.
 Al-Akhbar (Lebanon), January 11, 2016, March 31, 2016.
 See MEMRI Inquiry and Analysis No. 1232, Lebanon's Failure To Support Saudi Arabia In Struggle With Iran Sparks Crisis Between Lebanon And Saudi-Led Gulf, March 7, 2016.
 Al-Akhbar (Lebanon), January 11, 2016, February 2, 2016, March 31, 2016.
 Alahednews.co.lb, December 21, 2015; Al-Safir (Lebanon), Al-Akhbar (Lebanon), December 22, 2015.
 Al-Akhbar (Lebanon), December 25, 2015.
 Al-Akhbar (Lebanon), March 31, 2016.
 Al-Liwa (Lebanon), April 29, 2016.
 Al-Nahar (Lebanon), May 4, 2016.
 Al-Akhbar (Lebanon), May 16, 2016, Al-Safir (Lebanon), May 13, 2016.
 Alahadnews.com.lb, May 2, 2016.
 Al-Safir (Lebanon), May 12, 2016.
 Al-Safir (Lebanon), May 13, 2016.
 Al-Akhbar (Lebanon), May 13, 2016.
 Al-Safir (Lebanon), May 13, 2016.
 Al-Safir, Al-Akhbar, Al-Mustaqbal , Al-Modon (Lebanon), May 13, 2016.
 Al-Safir (Lebanon), May 13, 2016; Al-Akhbar (Lebanon), May 13, 2016.
 Al-Nahar (Lebanon), May 14, 2016. This hadith is attributed to Abu Dhar Al-Ghafari, a Companion of the Prophet Muhammad, and the fourth person to be converted to Islam by him. However, no verification or evidence has been found for such a hadith in the Book of Hadiths, and some even claim that it is not reliable.
 Alahednews.co.lb, May 6, 2016.
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