Lebanon's new central bank chief vows to fight money laundering and 'terrorism' funding

Lebanon's new central bank governor vowed Friday that the institution will fight money laundering and the financing of "terrorism" and will work independently away from political intervention.

Karim Souaid, who was speaking after officially taking office in Beirut, added that he will work on restructuring the banking sector and public debt and returning money to depositors.

Lebanon's economy has been witnessing its worst crisis in its modern history since 2019 and the state must implement reforms demanded by the international community. Such reforms are needed to unlock international aid, and on top of that, Israel's 14-month war with Hezbollah caused what the World Bank estimates were $11 billion in damages and economic losses.

Lebanon's crisis is rooted in decades of corruption by the country's political and financial leaders that drained state resources and eventually led to a run on the banks in 2019 after which people have lost access to their deposits. The situation has since been made worse with Covid-19, the massive Beirut port blast in August 2020 and the Israel-Hezbollah war.

Since the historic meltdown began Lebanon has been running on a cash economy and in October, the Paris-based Financial Action Task Force, or FATF, an international anti-money laundering watchdog, placed Lebanon on its "grey list."

"We will work on implementing international laws on top of them combating money laundering and support for terrorism," Souaid said. The former asset manager added that banks in Lebanon should recapitalize by pumping new money and those that cannot and don't want to can merge with other lenders. He said that the priority will be to return deposits starting with people who have small accounts. He said the return of deposits should be the responsibility of the banks, central bank and the state.

Souaid said the central bank will study all economic recovery plans put forward by previous governments to help the small nation get out of the crisis.

Wassim Mansouri, who had been acting central bank governor since July 2023, said the central bank's reserves stood at 10.727 billion at the end of March.

Souaid succeeds Riad Salameh, the embattled former governor of 30 years whose term ended with several international corruption cases lodged against him for embezzlement and other financial crimes. Salameh, currently in prison, was appointed in 1993, when Lebanon was scrambling to bounce back after a 15-year civil war.