Hassan did not hesitate to turn to one of the well-known institutions in his community to seek a small loan after the latest war between Hezbollah and Israel. His home was damaged, his income shrank, and Lebanese banks had closed their doors to him years ago. What he simply needed was a sum of money to help him get back on his feet. His collateral was an amount of gold he had set aside for a dark day like the one he was going through. This is what Al-Qard Al-Hassan Association offers: soft loans backed by financial and in-kind guarantees such as gold.
But behind this social service lies a much larger story that has preoccupied the international community, which views the institution as engaging in the financing of entities designated as terrorist organizations, in addition to carrying out financial transactions outside the regulated legal framework. This was confirmed by economic expert and Lebanese MP Razi El-Hajj in an interview with Alhurra, noting that “this association obtained a registration certificate from the Lebanese Ministry of Interior, but it carries out activities in violation of its internal bylaws and practices banking and financial operations stipulated in the Monetary and Credit Law without a license from the Central Bank of Lebanon.”
Large-Scale Financial Activity
Al-Qard Al-Hassan Association was founded in the early 1980s following the Israeli invasion of the Lebanese capital, Beirut, in 1982. It presents itself as a charitable institution that lends to all Lebanese without interest. However, it is directly run by Lebanon’s Hezbollah and operates entirely outside the traditional banking system and its oversight. In theory, according to economic journalist Azza El-Hajj Hassan, “Al-Qard Al-Hassan’s objective is purely social, as it provides financial services to nearly 300,000 clients. But in practice, it has no right to engage in financial activities that should be confined to licensed financial and banking institutions, such as accepting deposits from clients, issuing loans, and buying and selling gold without authorization.”
The institution, which is more than 40 years old, has operated under the watch of the Lebanese state throughout these years, allowing its activities to expand to more than 34 branches, mostly in areas considered Hezbollah strongholds. Unofficial figures indicate that Al-Qard Al-Hassan’s volume of transactions is in the tune of $3 billion annually, including $500 million in small loans. It trades about 15 tons of gold and maintains up to 100,000 depositors and 200,000 borrowers. “An institution of this size and scale is not something the state can deal with or regulate overnight,” El-Hajj Hassan told Alhurra.
Tightening the Noose on Hezbollah
Since 2007, the U.S. Treasury Department has imposed sanctions on Al-Qard Al-Hassan, saying Hezbollah uses it as a front to manage “financial activities and act as a gateway to the international financial system.” Israel also targeted several of its branches during its latest war with Hezbollah in Lebanon, as the association is considered a financial arm of the group no less important than its military wing. Hezbollah Secretary-General Naim Qassem warned the Lebanese government last November against meddling with Al-Qard Al-Hassan, amid recurrent reports about a move to shut it down as part of efforts to put Lebanon on a path to financial recovery and restore international confidence.
For the Lebanese state, this is one of the most sensitive financial issues, as “the association’s activities were among the main reasons that made the Financial Action Task Force (FATF) to place Lebanon on the grey list — that groups countries subject to enhanced scrutiny regarding their ability to combat money laundering and terrorist financing,” according to El-Hajj Hassan. Therefore, halting its illegal activities and addressing its status is a fundamental condition for restoring international confidence in Lebanon. The process of regulating the institution’s activities began when the Central Bank of Lebanon issued a circular last July banning banks, financial institutions, and brokerage firms from dealing with unlicensed entities, foremost among them Al-Qard Al-Hassan. This step was followed by behind-the-scenes discussions and deliberations within Lebanese authorities on the need to close Al-Qard Al-Hassan.
Two Sides of the Same Coin
Hassan told Alhurra that he was surprised to find that the invoices issued after completing his transaction were no longer in the name of Al-Qard Al-Hassan, but rather under an institution called “Joud (Generosity),”. The collateral has also changed from pawning gold to two commercial transactions: the first involved purchasing the gold with an official invoice, and the second resells it to him in installments, also with an invoice. Although Hassan’s is but one individual experience, it may point out to a attempt that raises questions about whether Hezbollah is seeking to replace Al-Qard Al-Hassan with an alternative legal entity.
In this context, Azza El-Hajj Hassan, who is closely familiar with the file, says the party is trying to adapt to U.S. pressure on the Lebanese state to regulate financial flows. As a result, it licensed a commercial entity under the name “Joud” to buy and sell gold without taking money deposits. This way, it preserves the social character of its services while projecting a semblance of transparency consistent with regulatory requirements, she explains.
She adds that Al-Qard Al-Hassan’s services in their current form will not continue, but will be fragmented, with each service licensed separately and placed under the supervision of the relevant authorities, stressing that no activity outside oversight will persist. The effectiveness and sustainability of this path depend on the performance of the Lebanese state and to what extent of the party is willing to cooperate, noting that ATMs are likely to be shut down according to available information.
Circumventing Sanctions
Monetary and financial authorities are attempting to contain Al-Qard Al-Hassan technically through measures related to combating the “cash economy.” The Central Bank of Lebanon asserts that it is not directly responsible for overseeing the association since it does not fall under its authority, and that its role is limited to issuing circulars preventing banks and transfer companies from dealing with unlicensed institutions. The Ministry of Finance, for its part, acknowledges the seriousness of the issue but says confronting it falls on the Ministry of Interior and the government. Meanwhile, the name “Joud” emerges as a new front for an old reality that reinforces the logic of a state within a state.
In this regard, MP Razi El-Hajj told Alhurra that “if a new financial institution is licensed, the funds cannot be of unknown origin; otherwise, it would effectively become a licensed money-laundering institution. Therefore, changing the name will be of no benefit without full compliance with international standards and the Central Bank of Lebanon’s anti-terrorism and anti-money-laundering requirements.” He added that “the matter requires close monitoring; otherwise, Lebanon will not be able to exit the grey list and may even risk falling onto the blacklist if it fails to establish clear standards for its financial and monetary proceedings, for the parallel economy and for money laundering regulations. He says, “it’s been reported that Hezbollah, one way of the other, is still capable of securing funds in excess of $70 million per month — nearly $1 billion annually.”
All of this comes amid observers ruling out U.S. approval, as Washington — whose Treasury Department closely scrutinizes Lebanese financial details — insists on the closure of Al-Qard Al-Hassan, not merely changing its form while keeping its essence intact.
