Beirut: At a time when 77 per cent of all Lebanese claimed that their financial situation deteriorated over the past six months — according to a Byblos Bank/AUB Consumer Confidence Index — Central Bank Governor Riad Salameh has stressed that all local banks would abide by the latest Office of Foreign Assets Control (OFAC) of the US Department of Treasury rules, even as he requested justifications before suspending accounts suspected of belonging to Hezbollah operatives.

“The law issued in the United States is an American law that is supposed to be implemented globally and in Lebanon, and, accordingly, Memo 137 that was issued by the Central Bank on May 3, 2016 was a Lebanese legal obligation,” Salameh declared in a formal statement issued on Tuesday. This was more than a technical concern because “Article 70 of the Monetary and Credit Act required the Central Bank to ensure credit stability [which] cannot be secured without implementing this US law.”

It was for this reason, Salameh clarified, that the Lebanese Central Bank issued Memo 137. In turn, this legal step aimed to channel complaints lodged against local banks, which would henceforth deal with the Central Bank to fulfil any international obligation. The nuance was critical precisely to prevent a huge risk that could, potentially, isolate Lebanon’s vital banking sector, a pillar of the economy.

The issue surfaced after the Minister of Industry, Hussain Hajj Hassan, warned the cabinet last Thursday that a “red line” had been crossed after two Lebanese banks suspended three Hezbollah-linked accounts in conformity with the US sanctions law. Hajj Hassan, a Hezbollah member, reported that two unnamed Lebanese banks suspended the accounts of two deputies as well as the account of a former parliamentarian’s daughter. He hammered that “the US sanctions shall not pass” that, to put it mildly, was an open threat.

Caught between indigenous political requirements and global fiduciary obligations, Salameh pointed out that “except for accounts belonging to individuals or firms blacklisted by the Office of Foreign Assets Control,” which named Hassan Nasrallah, Mustafa Badr Al Deen and others, banks seeking to suspend accounts must justify the frequency of suspected transactions associated with a particular account and must coordinate with the Central Bank for each step they choose to take.

Whether these procedures were delaying tactics were impossible to determine although Salameh, along with senior Lebanese government officials recognised that there was no way to neglect suspected accounts, lest the entire banking system suffer. Prime Minister Tammam Salam was empowered to coordinate the issue with the Central Bank Governor as well as Minister of Finance Ali Khalil Hassan, who was fully briefed by US Treasury officials in Washington during his most recent sojourn to the American capital as to what to expect in case of non-compliance.

Hezbollah insisted that the Central Bank and private banks that applied the sanctions would be participating in “a war of exclusion” against the party by upholding this law, though Salameh reiterated that the bank would abide by the restrictions in the December 2015 Hezbollah International Financing Prevention Act.

Failure to abide would have immensely negative consequences since US regulations were geared to target any individual or institution that “knowingly facilitated a significant transaction or transactions for” Hezbollah or any individual, business or institution linked to the party. Daniel Glaser, the Assistant Secretary for Terrorist Financing at the US Treasury, reiterated his government’s policies during his most recent visit to Beirut a few days ago, and insisted that Washington would monitor any and all transactions undertaken by Hezbollah operatives before taking appropriate actions. Bankers feared that international transactions, including wire transfers in any currency, would be significantly delayed.

Secretary-General Hassan Nasrallah insisted in 2015 that his group would not be affected by the law, presumably because it did not deal with Lebanese or even foreign banks, though thousands of Lebanese individuals and many organisations associated with the party were not so lucky.