It was strange to witness the campaign that was launched in the media against Lebanese banks accusing them of refraining from carrying out dollar transactions for their Syrian clients, when it is, in fact, American banks which prevent transfers to “individuals or entities located in Syria”, according to the sanctions. Any transfers made by Lebanese or other banks to the accounts of Syrian clients have to pass through American banks.
Lebanese banks face American pressure against playing the role of a safe haven for Syrian banks. However, at the same time, Lebanese banks have subsidiaries in Syria in partnership with Syrian investors. And in Lebanon, there are Syrian clients with long-established ties with Lebanese banks. According to unofficial estimates, about five percent of all bank deposits in the Lebanese banking sector belong to Syrian clients.
So Lebanese banks are dealing carefully with Syrians and are hesitant in opening accounts for unknown clients out of fear that they could be linked to individuals targeted by U.S. sanctions. Lebanese banks are also refusing to accept cash in compliance with anti-money laundering regulations.
Deposits in Lebanese banks have increased by only $5 billion this year until August, of which $2 billion is from non-residents of different nationalities. It is then difficult to say that there is an influx of money from Syria into Lebanon. As for direct transfers from Syria, these are banned by authorities in Damascus in order to preserve foreign currency and deposits inside the country.
But the challenge for Lebanese banks lies in figuring out how to deal with their existing Syrian clients with whom they have had long lasting relationships. Some of those clients have been designated by the sanctions; they have had their assets frozen and are banned from financial dealings in Europe and America.
But the grey area involves the Syrian clients who have nothing to do with the names designated by the sanctions. Lebanese banks are now very careful in dealing with those clients, and are scrutinizing the final destination of any suspected transfers. As for the dollar transactions of Syrian clients, the central bank has not issued a clear directive in that regard, but major banks have limited the dollar transactions of their Syrian clients, because of the scope of the U.S. sanctions against Syria.
Both the European Union and the United States imposed sanctions on Syria but it is the U.S. sanctions that are more dangerous because they are comprehensive. The European sanctions targeted 18 individuals, froze their assets, and banned financial transactions relating to their accounts.
The U.S. sanctions came in three stages this year: first in April, when the assets of Syrians accused of “repression and violation of human rights” were frozen. The second was in May, when the sanctions’ list was expanded to include the government and its officials, and anyone acting on their behalf. The third came in August, and it targeted the country of Syria as a whole, in addition to the freezing of the assets of all the government entities and precluding all U.S. and non U.S. persons from executing transactions for these entities through U.S. banks or U.S. financial system.
The danger lies in that last set of sanctions, since it prohibits U.S. persons from providing financial or other services to all individuals or entities in Syria, and not just the government institutions, foreclosing the access of Syria residents to the U.S. financial system (with very minor exceptions that can hold various interpretations). This is in effect what prohibits banks from executing dollar transfers for Syrian clients, because when a bank in one country transfers money in dollars to the account of a Syrian client to another country, the transfer has to pass through a correspondent American bank. This violates the sanctions, which ban American banks from dealing directly or indirectly with clients located in Syria.
There is no doubt that innocent Syrian individuals will be affected by the sanctions, but recent American accusations against the Lebanese-Canadian Bank of money laundering are still vivid in Lebanese citizens’ minds. The responsibility on Lebanon’s prime minister, the governor of the central bank, and the banks’ chiefs, is much bigger now. The situation is very sensitive and there is no room for risk taking. Extreme caution is required to avoid falling into the trap of the sanctions.
The writer is a Senior Business News Presenter at Al Arabiya and can be reached at firstname.lastname@example.org or followed on Twitter at @Nadine_bn. This article first appeared in An Nahar newspaper on Oct. 7. 2011 and was translated by Mustapha Ajbaili, who can be reached at email@example.com