Lebanon: a transit for cocaine and heroin

As if the government’s performance in Lebanon is not enough for Lebanon’s outside bad reputation. The worst ended up with two-volume report issued by the “International Narcotics Control Strategy” on March 5 with two dimensions:
The first is about Lebanon in the world of Drug Traffic. The first description given to Lebanon in the report: “It is a transit country for cocaine and heroin. Criminal networks based in West Africa, Panama, and Colombia, including some with ties to known weapons smuggling and terrorist networks, work with Lebanese networks to traffic drugs to markets in Europe and the Gulf States. Additionally, minor quantities of heroin may be processed in remote side valleys of the Bekaa Valley which are difficult for Lebanese security forces to control. Despite a robust eradication program, the stagnant economic situation in rural Lebanon makes illicit crop cultivation appealing to local farmers in the Bekaa Valley, a condition recently exacerbated by the worsening security situation in Syria that has interrupted legitimate export opportunities”.
“The Lebanese Internal Security Forces (ISF) Counter Narcotics Units are well led, equipped, and disciplined. The ISF estimates that yearly illicit drug production continues to decline from its peak in 2002, due in large part to regular, high-profile eradication campaigns. The ISF Counter Narcotics Units’ eradication program came to a halt between August 15 and mid-September due to the redeployment of security forces to other parts of the country to respond to an outbreak of sectarian instability. This redeployment led to the cultivation and some harvesting of marijuana and hashish. Despite the temporary halt to the program, the ISF Counter Narcotics Units estimates that 75 percent of the cultivation was eradicated before it could be harvested”, according to the report. However the Lebanese government has pledged to work with local farmers on a substitution program, but it has not done anything for compensation.
Different types of drugs are available in Lebanon, including: marijuana, hashish, heroin, cocaine, and other synthetics such as ecstasy. There has been a rise in synthetic drugs, particularly fenethylline, due to local law enforcement’s lack of familiarity with identifying these types of drugs and the lack of import restrictions on precursor chemicals. While some synthetic drugs are manufactured in Lebanon, they are primarily smuggled into the country from Eastern Europe both for sale to high-income recreational users in Lebanon and for transit to the Gulf States, according to the report.
As of October 2012, the ISF reported 2,198 drug related arrests since the beginning of the year, which is up slightly over the same time period in 2011. The ISF arrested 284 heroin users, 394 cocaine users, 773 hashish users, and 133 drug users of various synthetics. Between January and the end of September, Lebanese authorities seized 69 kilograms (kg) of cannabis, 5 kg of cocaine, and 188 kg of hashish. Authorities also seized 206,000 fenethylline pills and 6 kg of ephedrine powder. In this context, there are no reliable estimates of the number of drug users in Lebanon despite the presence of several rehabilitation programs, some of which receive support from the Ministries of Social Affairs and Public Health and the UN Office of Drugs and Crime.
The report recalled the 2011 designation of Lebanese Canadian Bank (LCB) as a financial institution of primary money laundering. There is an ongoing investigation into this network, which moved illegal drugs from South America to Europe and the Middle East via West Africa and laundered hundreds of millions of dollars monthly through accounts held at LCB. This network also used trade-based money laundering tactics involving consumer goods throughout the world, including used-car dealerships in the United States. The terrorist organization Hizballah received financial support from the criminal activities of this network.
As a conclusion, “Lebanon is working to confront drug trafficking networks operating on its territory, despite considerable challenges. Lebanon has a nascent but functioning judicial system that is slowly recovering from the effects of civil war and Syrian occupation”.
As for the second dimension, it is about money laudering in Lebanon which is a financial hub for banking activities in the Middle East and eastern Mediterranean. Lebanon has a substantial influx of remittances from expatriate Lebanese people, estimated by the report at approximately $7.6 billion annually. “Reports suggest that a number of Lebanese abroad are involved in trade-based money laundering activities as revealed by the Lebanese Canadian Bank operations. Laundered proceeds come primarily from foreign criminal activity and organized crime. Domestically, there is a black market for cigarettes, cars, counterfeit consumer goods, and pirated software. “However, the sale of these goods does not generate significant proceeds that are laundered through the formal banking system. Lebanese expatriates in Africa and South America have established financial systems outside the formal financial sector. Lebanese diamond brokers are reportedly part of an international network of traders who participate in underground activities.
Exchange houses are reportedly used to facilitate money laundering and terrorism financing, including by Hizballah. Although offshore banking and trust and insurance companies are not permitted in Lebanon, the government has provisions regarding activities of offshore companies and transactions conducted outside Lebanon or in the Lebanese Customs Free Zone. Offshore companies can issue bearer shares.
The report pointed out that three laws were intended to strengthen Lebanon’s anti-money laundering/counter-terrorist financing and were passed by the Council of Ministers in 2012, and, were awaiting Parliament’s approval. These include: amendments to the existing money laundering Law 318/2001 which would add new offenses to the existing law, impose financial penalties on obliged entities for reporting violations, and require to report suspicious transactions which would authorize the Ministry of Finance to join bilateral and multilateral agreements to exchange information.
On April 5, 2012, the Banque du Liban issued Basic Circular No. 126 governing the relationship between banks and financial institutions and their correspondents abroad and required banks and to abide by the same laws.
In 2012, the Special Investigation Commission (SIC) was active by sending 29 allegations to the Office of the Prosecutor General for prosecution against money laundering. The report pointed out a “deficiency” within this Commission that could be attributable to a lack of political will to effectively prosecute cases.
From January 2012 to October 2012, Lebanon’s Internal Security Forces (ISF) received 16 allegations of money laundering and 26 allegations of terrorist financing, mostly from Interpol. According to the report, “the ISF Money Laundering Department staff lacks the training and skill set to conduct effective investigations, as well as equipment and software programs to effectively track cases. Additionally, law enforcement entities often do not coordinate activities.
As a conclusion, Lebanon should increase overall efforts to disrupt and dismantle money laundering and terrorist financing activities, including those carried out by Hezbollah. The Government of Lebanon should enforce cross-border currency reporting. It should examine domestic ties to the international network of Lebanese traders. It also should consider amending its legislation to allow a greater ability to provide forfeiture cooperation internationally.