Halawi : law-abiding money changers are unfairly accused of money laundering
More than 250 money changers across the country are likely to be stripped of licenses and forced into Lebanon’s underground economy, the head of the Lebanese Money Changers Association
told The Daily Star, following a Central Bank decision last month to double compulsory minimum capital in an attempt to clamp down on money laundering.
“Out of 400 [licensed] money changers, we have between 250 and 300 who are not capable of affording the hike ... What is the advantage of forcing the money changers into the black market?” said Mahmoud Halawi, the head of Lebanese Money Changers Association.
Halawi insisted that the step would induce more chaos in the sector, already swarming with what he described as “protected” unlicensed businesses.
The measure would not aid in efforts aiming to combat money laundering if the business, according to Halawi, “had nothing to do at all with money laundering activities that go through completely different channels.”
“We are always accused of money laundering because of the nature of our business involving cash transactions. But how can our businesses, most of whom operate at under $30,000 of daily trading, be involved in any significant money laundering?” he argued.
The Central Bank has been increasingly clamping down on alleged illegal activities by some money changers. A report by The Financial Times claimed last November that Syrian nationals were using the relaxed nature of the business for what it described as an intensifying capital flight caused by the escalating crisis across Syria.
But more significantly, a Manhattan-based U.S. federal court sought on Dec. 15 a massive $480 million in damages against two Beirut money changing businesses, the now sold out Lebanese Canadian Bank, and a number of U.S.-based car export firms.
A report by The New York Times said the court highlighted that these entities had been involved in drug money laundering through Lebanon. The court argued huge amounts of cash had been flown to the country and deposited initially into foreign currency exchange businesses then channeled through to the Lebanese Canadian Bank. Hezbollah was accused by the court of taking a portion of the profits.
Halawi denied any relation of money changers to money-laundering activities, saying not one single case in a Lebanese court had ever named a money changer in such activities.
“There are two [currency exchange] companies reportedly mentioned in a U.S. lawsuit for money laundering but that is an isolated case not [yet] recognized by Lebanese law,” he said.
The Central Bank issued last November a circular that ordered money changers to “know the client,” forcing them to investigate more into the backgrounds of highly cashed-up clients. The circular held money changers, commercial banks and clients responsible for declaring the source of funds from money-changing operations.
Lebanese money changers, Halawi confirmed, were consecutively subject to increasing restrictions placed on them by the banking sector.
“Banks have recently closed the bank accounts of almost all money changers,” Halawi complained, saying that the Association of Lebanese Banks had been firm in discontinuing all dealings with the sector.
When asked about the reasons behind the hike in the compulsory minimum capital, Halawi said his association had not received a clear answer from the Central Bank yet.
Among the reasons, he said was restricting the business to commercial banks and bigger exchange businesses.
“They [Central Bank] might be also aiming at decreasing the number of money changers, thinking this would facilitate the regulation of the sector,” Halawi said.
Halawi made a point to stress that 2,000 families were threatened by the decision urging the Central Bank to consider the devastating social impacts of their decision.
“We are no longer capable of bearing arbitrary decisions taken without planning especially in a toughening financial crisis,” Halawi said in a news conference held earlier Friday.
The Association of Lebanese Money Changers came out strongly against a decision by the Central Bank that more than doubled requisite capital needed for licensing currency exchange businesses.
The Central Bank had decided to hike minimum capital required for category A money changers to LL750 million, up by some LL250 million from their previous levels. The capital of category B money changers was hiked to LL500 million, up by some LL400 million.
The bank’s decision gave a one-year grace period for implementing the measure. A new currency exchange business would have to implement the hikes immediately.