Avoiding sanctions, Lebanon revokes Bank Saderat Iran's license

Lebanon’s Central Bank has revoked the licence of one of Iran’s largest banks that operated in the country, amid intensifying US pressure on countries to sever financial and commercial ties with Tehran.

Central Bank Governor Karim Souaid told *Bloomberg *that the decision to revoke Bank Saderat Iran’s licence, taken earlier this week, demonstrates Lebanon’s determination to protect its banking sector from possible US sanctions.

One of Iran’s oldest and largest commercial banks, Bank Saderat operates several branches overseas. In Lebanon, however, it did not operate as a full-scale commercial bank or offer the extensive retail services typically provided by major Lebanese lenders. Its operations were largely confined to facilitating certain financial services linked to specific networks or entities.

Speaking on the sidelines of the International Monetary Fund’s annual meetings in Bangkok, Souaid stressed that Lebanon could not afford not to take such measures. He said that while some decisions may be politically sensitive, in an apparent reference to Hezbollah, protecting Lebanon’s banking sector from foreign sanctions must remain a priority.

Limited impact on Lebanon

Financial analyst Mounir Younes said the revocation was unlikely to have a significant impact on Lebanon’s economy or banking sector, as Lebanese banks had historically avoided dealing with Bank Saderat because of the sanctions imposed on Iran.

"The impact on the local market and the Lebanese banking sector is close to zero," Younes told The New Arab. "Historically, including during the tenure of former central bank governor Riad Salameh and throughout successive rounds of sanctions, the Lebanese banking sector avoided any dealings with Bank Saderat Iran. The same was true of Lebanese customers, speaking of the wider public."

He said the bank’s customers in Lebanon were likely limited to a small number of people or entities with links to Hezbollah, the Iranian embassy in Beirut or the Iranian community in Lebanon, including both security personnel and civilians.

"The impact is therefore extremely limited on this small segment, which is the one targeted by US sanctions. The effect on the Lebanese economy and banking sector is consequently close to zero," he added.

Younes said any impact would be confined to the relatively few individuals or entities that dealt with the bank, whether through trade credits between Lebanon and Iran or transfers designed to circumvent US sanctions. He added that Bank Saderat did not have correspondent banking relationships outside Iran, with its only correspondent bank based inside the country.

Slow pace of reforms

Souaid also stressed the need for Lebanon to secure its removal from the Financial Action Task Force's (FATF) grey list, saying illicit funds and money-laundering operations must be rooted out of the Lebanese economy.

He added that the central bank had hired a specialised US firm to map Lebanon’s cash economy and identify suspicious financial activity, according to the governor.

A cash economy has flourished in Lebanon since the 2019 financial collapse, and the country remains on the FATF grey list and an EU list of jurisdictions with strategic deficiencies in anti-money-laundering and counter-terrorist-financing measures.

The seven-year financial crisis has seen the banking sector collapse and the local currency lose more than 95 percent of its value, locking millions of depositors out of their accounts.

Legislation to restructure the banking sector and unlock deposits has slowly been passed. Talks with the International Monetary Fund to secure a support package have been conditional on the country cracking down on illicit financial activity and passing sweeping reforms, which the government has promised to deliver.

But major hurdles remain, with the country’s ruling political and banking elite widely seen as resisting reforms that could undermine their influence or leave them liable for the cost of restructuring.

Revoking the licence of Bank Saderat Iran in Lebanon came following similar steps taken by other countries in the region. Last month, Turkey’s banking regulator revoked the operating licence of Bank Mellat’s Istanbul branch, while the UAE Central Bank barred all branches of Bank Melli Iran from conducting financial transactions to or from Iran, including transfers and trade finance.

Questions over legal status of Al-Qard al-Hassan

Beirut has also been under pressure from Washington to take action against institutions linked to Iran-backed Hezbollah, including the group’s financial arm, Al-Qard al-Hassan. In July last year, the Lebanese central bank issued a directive banning financial institutions from dealing with the association.

Washington has continued to pressure Beirut to shut down the institution.

Operating outside Lebanon’s formal banking sector, Al-Qard al-Hassan provides interest-free Islamic loans, often secured against gold. Critics have accused it of functioning as a shadow bank for Hezbollah, with some calling for its closure or integration into the regulated financial system. Human Rights Watch noted in October 2024 that the association provided collateralised loans despite lacking a central-bank licence to operate as a financial institution.

Younes said that, although Lebanon’s Justice Minister Adel Nassar had asked the public prosecutor at the Court of Cassation to open an investigation into Al-Qard al-Hassan, the judiciary was still waiting for information from the central bank.

"The Public Prosecution at the Court of Cassation says it is waiting for information from the central bank," he said. "For an investigation to be opened, the central bank would need to file a complaint or provide information indicating that Al-Qard al-Hassan is violating Lebanon’s banking regulations or the rules governing the sector’s operations."

Younes said that because Al-Qard al-Hassan accepts deposits and provides loans, its activities could be considered banking operations. The judiciary therefore needs information from the central bank indicating that the association is breaching banking regulations or compliance standards on combating money laundering and terrorist financing.

He added that the central bank considers the question of Al-Qard al-Hassan’s licensing to fall under the responsibility of the Interior Ministry, which granted the association its licence as a charitable organisation.

He also pointed to the role of the Special Investigation Commission at Lebanon’s central bank, which is responsible for investigating suspected money laundering and terrorist financing. However, he said, the commission had not taken action in the matter so far, to his knowledge.

Hezbollah has been significantly weakened by three years of conflict with Israel, with its weapons stockpile degraded and many of its financial and military supply routes disrupted. The US Treasury has imposed extensive sanctions on the group, and individuals it says are linked to it.

Despite this, Hezbollah has refused to disarm while Israel continues to occupy parts of southern Lebanon and carry out strikes and demolitions, despite a June framework agreement between Beirut and Tel Aviv.