The vested interests of Lebanon’s political elites perpetuate the blurring of lines between licit and illicit activities from which Hezbollah and other parties have long profited.
Hezbollah, like other ruling political parties in Lebanon, is able to exploit lax finance and public contract legislation and measures for its own benefit. In a number of cases in this regard, Lebanese political parties may belong to rival alliances but either operate in tacit agreement with one another or turn a blind eye to the others’ transgressions. This serves to preserve the system of elite pacts in Lebanon. As such, Hezbollah’s growing influence must be seen as partly a product of a political system that fosters cooperation between elites to sustain the status quo that enables their access to power. Hezbollah minimizes entering into formal agreements with parties outside its alliance to reduce the likelihood that its actions can be fully traced, but informal cooperation and collusion among all parties is the norm in Lebanon.
Use of public contracts
Lebanon does not have a formal process requiring full transparency in the awarding of public tenders and contracts. This is exploited by the country’s ruling parties, including Hezbollah, who use private companies to generate funding through public contracts.
The acquisition of public contracts by Hezbollah affiliates sometimes happens with tacit acceptance by its political rivals. In 2014, the Lebanese state reportedly paid $3 million to Sama, a company close to Hezbollah, so that the publicly owned Télé Liban could broadcast football World Cup matches; Sama owned the exclusive rights to broadcast BeIN Sports channels, the only ones that were showing the matches. The arrangement was repeated in 2018. Shortly before the 2018 World Cup, Sama hosted a conference at the luxury Phoenicia Hotel in Beirut as part of a purported campaign to fight satellite channel piracy. In addition to senior figures from Sama, the conference was attended by information minister Melhem Riachi (representing President Aoun), telecommunications minister Jamal Jarrah (representing Prime Minister Hariri), Ali Fawaz (representing youth minister Mohamad Fneish), MP Nazih Najem (part of the Future Movement bloc), Rami al-Rayess (media representative of the Progressive Socialist Party), and representatives from the state security agencies. Sama board member Tarek Zeinan gave a speech saying that the company’s leadership was very happy that Sama and the Lebanese state were working together to ensure that all in Lebanon could watch the World Cup through Télé Liban for free, and as part of an effort to fight piracy. In reality, however, the awarding of the contract to Sama had not been subject to a public tender because there was no formal Lebanese state requirement for such a tender.
With Lebanon’s financial crisis intensifying, and with deeper US sanctions targeting Iran and Hezbollah in 2019, Hezbollah adopted a public anti-corruption rhetoric, particularly against former prime minister Fouad Siniora – whose 2005 government was widely seen as backed by the US, and who is a key figure in Saad Hariri’s Future Movement. This anti-corruption rhetoric was directed more widely, too. Hezbollah MP Hassan Fadlallah, for instance, gave a speech in February 2019 in which he said that there are documents held by the Ministry of Finance that, if exposed, would lead to several key government figures ending up in jail. Pointing the finger at other parties for allegedly stealing state resources helped Hezbollah deflect responsibility for the financial crisis enveloping Lebanon, as well as attention from the impact of tighter US sanctions on its funding: Hezbollah’s constituents were suffering as a result of the financial crisis, and the sanctions meant that the organization’s ability to help was reduced. Notwithstanding its public rhetoric, Hezbollah was increasingly relying on informal partnerships with Christian business figures and government officials to conduct its financial affairs in ways that would get around the sanctions. In September 2020 one such figure, former minister of transport and public works Yusuf Finyanus, was sanctioned by the US on the basis of having ‘directed political and economic favours to Hezbollah, including ensuring Hezbollah-owned companies won government contracts worth millions of dollars and moving money from government ministries to Hezbollah-associated institutions’. According to the US Treasury, Finyanus had siphoned off money to Arch Consulting and Meamar Consulting while he was minister.
Pointing the finger at other parties for allegedly stealing state resources helped Hezbollah deflect responsibility for the financial crisis enveloping Lebanon, as well as attention from the impact of tighter US sanctions on its funding.
The US Treasury also sanctioned those two Hezbollah-affiliated engineering and construction companies for benefiting the group. Arch Consulting and Meamar Construction were accused of being owned, controlled or directed by Hezbollah and subordinate to the party’s Executive Council. Arch Consulting was actually set up in 2005 as a private company by Jihad al-Binaa to engage in building hospitals, schools, infrastructure and water projects in Lebanon and abroad. The US Treasury said that the two companies won public contracts worth millions of dollars from the Lebanese state (mainly through municipalities that are controlled by Hezbollah in the south of the country, the Beqaa and Hermel) and were siphoning off funds to Hezbollah’s Executive Council. The website of Arch Consulting states that it has implemented projects for various municipalities and international organizations such as UNHCR, the Red Cross and UNRWA.
Use of state commercial and finance regulations
Part of what enables companies like Sama to operate as they do is Lebanon’s lax rules regarding commercial enterprises, which mean that companies can exist as a complex web that makes detecting interests and transactions difficult. A search through the publicly available Commercial Register reveals three companies using the name Sama, all linked to Mohamad Fawzi Mansour. One of the companies, Sama Group SARL, lists Fadi Adel Jamaleddine as its lawyer. Jamaleddine is also listed in the Commercial Register as a board member and shareholder of three companies (Sol Blanc, Al Mansouri Real Estate, V69 Real Estate) whose head of the board of directors is Saleh Ali Assi, who is sanctioned by the US Department of Treasury.
The second of the companies is Sama SAL, which made an agreement with Lebanon’s Syndicate of Owners of Restaurants, Cafes, Night-Clubs and Pastries whereby these venues paid a fee in return for screening the World Cup in 2018. A company called Al Kabida Invest Holding owns 390 shares in Sama SAL. Al Kabida Invest Holding also owns 9,000 shares in the third Sama company, registered as Sama Holding SAL. Al Kabida Invest Holding also founded and owns 780 shares in a company called Trisat Communications Company Limited SAL. Trisat in turn owns 40 shares in Al Kabida Invest Holding, and its general director is Mohamad Fawzi Mansour. Trisat lists Fadi Ali Harkous as its authorized supervisor. Harkous is also the authorized supervisor of New Allpharma SARL, the pharmaceutical company tied to the Fneish family that was involved in the counterfeit medicines scandal in 2012.
Hezbollah’s engagement in money laundering as a source of revenue is well documented. The weakness of the Lebanese state has enabled this through poor monitoring and regulation of commercial and financial enterprises, as well as the country’s long-standing banking secrecy legislation. The US Treasury has been tracking Hezbollah’s illicit financial activity in Lebanon and globally, resulting in the closure of a number of banks in Lebanon (such as the Lebanese Canadian Bank) proved to have facilitated such activity. Hezbollah has been able to cover its tracks in Lebanon partly through having senior representation within state authorities that are meant to safeguard against corruption, such as in the ministerial task force for anti-corruption and in the Central Inspection authority that is meant to oversee commercial enterprises.
Hezbollah also makes indirect use of Lebanon’s free-trade zones. Expatriate businesspeople who may be engaged in illicit activities (such as money laundering or trade in conflict diamonds) outside the country are able to register several businesses in Lebanon under their name or under the names of close relatives (a spouse or a child, for instance) or affiliates. These companies operate in a wide array of fields – from construction, real estate and engineering, to tourism, entertainment and leisure, jewellery, general commerce and art – and make use of Lebanon’s free-trade zones for importing, storing and re-exporting goods. Sometimes, official records registering such companies are vague in their descriptions of what the companies do, which gives companies great flexibility in operating without being tracked.
Another illustration of Hezbollah’s taking advantage of the murkiness of Lebanese regulations is its association al-Qard al-Hassan, founded in 1982. As international sanctions targeting Hezbollah increased and as the financial crisis in Lebanon intensified in 2019, Hezbollah and its affiliates largely stopped using Lebanese banks, relying instead on al-Qard al-Hassan for their financial transactions. After operating informally for five years, the association was formally registered as an NGO at the Ministry of Interior in 1987, but it operates as a microcredit lending agency and a de facto bank that allows Hezbollah to pay its constituents and transfer money. As it is not classed as a bank or a financial institution, it does not fall under the banking laws surrounding cash and lending transactions (naqd wa tasleef) and has no ties to the Bank of Lebanon. Al-Qard al-Hassan is a major source of gold and foreign currencies for Hezbollah, and is used as a vehicle to channel cash funds in US dollars outside of the Lebanese banking system.
The examples given above illustrate that Hezbollah, like other political elites in Lebanon, takes advantage of the weak infrastructure of the Lebanese state to further its interests, and that the line between licit and illicit activities is often blurred. This makes it harder to isolate institutions involved in corruption for targeting through sanctions, for instance. The vested interests of other political parties in Lebanon also remove or at least reduce local incentives for reforming the system, as true reform would uncover their involvement in profiteering and corruption. It must be noted, however, that no other party in Lebanon effectively has its own financial vehicle, as in the case of al-Qard al-Hassan, which has allowed Hezbollah’s constituents to have an alternative to the formal banking system which is in ongoing crisis in Lebanon.