Lebanese pound notes (10,000 denomination) are seen in a machine at Lebanon's central bank, BdL, in Beirut on November 24, 2008. Photo: Ramzi Haidar / AFP
Lebanese pound notes (10,000 denomination) are seen in a machine at Lebanon's central bank, BdL, in Beirut on November 24, 2008. Photo: Ramzi Haidar / AFP

The United States on Thursday slapped sanctions on Lebanon’s Jammal Trust Bank, the latest in a string of moves meant to pressure the Lebanese authorities into further isolating Hezbollah.

“Treasury is targeting Jammal Trust Bank and its subsidiaries for brazenly enabling Hizballah’s financial activities,” the US Department of the Treasury said, using its preferred spelling for the Islamist group. 

“Jammal Trust provides support and services to Hizballah’s Executive Council and the Martyrs Foundation, which funnels money to the families of suicide bombers,” a department official elaborated. 

It was unclear which suicide bombers he was referring to, as the Shiite group has not deployed suicide bombers since the 1980s, and only then in extremely rare cases.

The bank immediately denied the allegations and promised to challenge the designation.

The larger point, however, appeared to be to send tremors across the Lebanese financial system, less than a week after the country was downgraded by Fitch to distress-level credit.

“This action is a warning to all who provide services to this terrorist group,” the Treasury statement said.

USAID partner

Jammal Trust Bank has engaged in a “long-standing relationship” with Hezbollah financial entities, the Department of Treasury alleged in its statement.

As recently as June 2018, however, the US Agency for International Development (USAID) partnered with Jammal Trust to launch its Financial Inclusion and Financial Literacy Initiatives meant to support disadvantaged communities.

“This American-Lebanese partnership will bring these disadvantaged groups into the financial system. It will promote saving and increase access to finance, thereby improving lives. This should generate additional economic activity to keep the Lebanese economy moving forward,” US Chargé d’Affaires Edward White said at the time.

Jammal Trust Bank (JTB), represented by its board of directors and its chairman and CEO, Anwar Jammal, hosted a luncheon to launch the ‘Financial Inclusion and Financial Literacy initiatives’ in partnership with the United States Agency for International Development (USAID), at Le Gray Hotel in Beirut, on June 20, 2018. Credit: Executive Magazine

The US Embassy in Lebanon did not immediately respond when asked whether the partnership had been ongoing at the time of the Treasury designation.

The bank appeared to have been blindsided by the designation.

“We have just learned with great surprise the decision by the US Department of the Treasury’s Office of Foreign Assets Control placing Jammal Trust Bank on its SDGT [Specially Designated Global Terrorist] list,” read a statement posted to its website Thursday night.

“JTB emphatically denies each and every allegation on which the OFAC apparently acted,” it added.

The bank has vowed to take “all appropriate steps in order to clear its good name” and to appeal the designation under the US Office of Foreign Assets Control.

Treasury tightrope

Lebanon’s central bank authorities have long walked a tightrope when it comes to US sanctions, going so far as to require Lebanese citizens to sign Treasury compliance forms in order to maintain even their Lebanese-pound bank accounts.

Hezbollah members of parliament are paid in cash in order to safeguard the financial system.

But with the administration of US President Donald Trump taking an increasingly hard line against Hezbollah’s patron Iran, the “maximum pressure” campaign appears to be playing out most aggressively in the fragile countries of its allies.

In a sign of degenerating ties between Washington and Beirut, the US did not appear to have coordinated with relevant Lebanese authorities in its latest move.

The new #US approach in sanctioning Jamal Trust Bank is #Trump Admin didn’t go through channels with #Lebanon Central Bank to dissolve this bank before sanctions as it was the case for the Lebanese Canadian Bank in 2013,” the Lebanon-focused analyst Joe Macaron pointed out on Twitter. 

The peg of the Lebanese pound to the US dollar, long been upheld as the sacrosanct guarantee of stability for the country, has in the past year faced growing concerns that it may not hold.

The US-based credit rating agency Standard & Poor’s on Friday said that Lebanon’s “continued weakness in foreign-currency inflows and the use of [central bank FX] reserves to meet government debt-service could test the country’s ability to maintain the currency peg.”

Fitch Ratings on the same day downgraded Lebanon from “B-” to “CCC” over “intensifying pressure” on the country’s financing model and an increasing reliance on “unorthodox” measures to attract currency inflows.

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