Hezbollah's Al-Qard al-Hassan faces shutdown of banking services amid US sanctions threat

A Lebanese financial institution affiliated with Hezbollah is set to undergo drastic changes as the US intensifies efforts to cut off the group's funding sources.

Citing sources familiar with the matter, Lebanese news site Almodon reported that Al-Qard al-Hassan was expected to undergo major operational changes that would strip it of functions resembling conventional banking. The use of cheques and ATM withdrawals could be suspended, with the institution shifting its focus entirely to social assistance.

The reported moves follow pressure from a US Treasury delegation on the Lebanese government to revoke Al-Qard al-Hassan's licence, under threat of sanctions if the demands were not met.

A financial expert in Beirut confirmed to The New Arab that the latest developments would be part of a broader plan targeting Al-Qard al-Hassan.

Reports late last month said the institution had been given a deadline of no more than three months to "settle all obligations to its clients, ahead of the permanent closure of all its branches". The New Arab could not independently verify those reports.

Al-Qard al-Hassan operates on an Islamic interest-free lending model and works outside Lebanon's formal banking sector. Many of Hezbollah's critics have called for its closure, as it operates like a bank despite not having an official licence.

Thousands of Lebanese have turned to the association to borrow against deposits of gold and other valuables, particularly after the collapse of Lebanon’s banking sector in late 2019.

The government has yet to present a final plan to end the country's historic financial crisis and return people's lifelong savings.

A cash economy has flourished, with Lebanon placed on the Financial Action Task Force grey list over money laundering concerns.

International lenders have told Lebanon it must undergo sweeping financial reforms to be removed from the FATF grey list and receive support to fix its banking sector and economy.

Last month, the Lebanese central bank announced that money changers and transfer companies must comply with stricter rules. In July, it issued a directive banning financial institutions from dealing with unlicensed entities, including Al-Qard al-Hassan.

The measures targeting Al-Qard al-Hassan come amid unverified US and Israeli claims that Iran has sent Hezbollah $1 billion this year, mainly via money exchange companies.

Washington is targeting all funding sources linked to Tehran-backed Hezbollah, which is facing an unprecedented financial crunch after being significantly weakened in the war with Israel last year.

Supply lines that once fed the group with money and arms via Syria were cut off after the fall of the Assad regime a year ago, and tight security measures are now in place at Lebanon’s air and sea borders.

Al-Qard al-Hassan branches across Lebanon were struck by Israel during the two-month all-out war last year. Israel has continued to violate the 27 November ceasefire agreement brokered by the US through frequent strikes on Lebanon.