The strike on Al-Qard al-Hasan bank, Hezbollah’s “shadow bank,” marks a new and creative phase in Israel’s battle against designated terror organization Hezbollah. Alongside military targets, Israel has now targeted financial institutions directly, striking several branches of the bank. This attack likely impacted cash and gold stored in the bank’s vaults – critical resources for Hezbollah.
The significance of this strike can be seen on multiple levels: disrupting Hezbollah’s economic recovery capability, undermining the morale and public trust of its operatives in the banking system on which they have long relied, and raising international awareness of the crucial economic role this bank plays for the organization.
Financing terrorism
Al-Qard al-Hasan is not a traditional bank. It is officially registered as a charity but in practice, it functions as Hezbollah’s shadow bank, designated by the US already in 2007 due to its connection to Hezbollah. Operating under the radar of the international banking system, it is not subject to regulatory oversight by the Lebanese government or international organizations, unlike any other regulated financial institutions that must comply with financial regulations, such as anti-terror financing regulations.
The “bank” serves hundreds of thousands of Hezbollah operatives and their families, providing them with salaries, loans, and funding for the organization’s ongoing activities. With its numerous branches, the bank acts as a separate financial economy within Lebanon. It is primarily funded through cash transfers from Iran, estimated at around $750 million annually, as well as revenues from international criminal activities, such as drug trafficking.
The financial network supporting Hezbollah is crucial to its ability to continue operating and recovering. Therefore, the attack on Al-Qard al-Hasan bank represents a significant blow to Hezbollah’s economic nerve center – a strike that targets not only its military but also its economic foundations.
The strategic importance of the strike
Physically striking a bank is uncommon in warfare, primarily because “ordinary” banks do not keep substantial reserves of cash and gold in their branches, making such attacks less worthwhile. However, the situation is different when it comes to Hezbollah, a designated terrorist organization under severe sanctions. Hezbollah’s operations are heavily restricted by international sanctions against it and its primary financier, Iran. As a result, a large portion of its assets are held physically in cash and gold.
The attack on the bank constitutes a significant economic blow, but it also creates a psychological impact. Finance is built on trust, and when a bank is physically damaged, public trust erodes, harming the organization’s reputation as well.
It must be acknowledged that while the strike may be significant and extensive, it is unlikely that the bank will collapse entirely. Hezbollah has probably concealed a substantial part of its funds in other locations, and Iran will likely continue to funnel additional funds as soon as the opportunity arises.
Nevertheless, the economic strike is crucial on several fronts. Firstly, it directly damages vital infrastructure essential for the organization’s recovery and ongoing operations, including paying salaries to operatives, procuring new weapons, and meeting daily needs such as fuel and food. Secondly, it severely undermines the trust of the bank’s customers, dealing a psychological blow to operatives and their financial security. Many even deposited family heirlooms as collateral for loans, which may have been damaged in the strike. The financial harm to Hezbollah operatives and their families will likely lead to further upheaval within the organization and its surrounding circles.
The next step: Economic warfare
To complete the action, Israel and the global community must take several additional measures. On a strategic level, they must capitalize on the momentum and lead a global economic combat against Hezbollah. Hezbollah’s dominance over the Lebanese economy already exerts a profoundly negative influence on Lebanon’s struggling economy. Without substantial action by the Lebanese government, supported by the international community, Hezbollah may be able to quickly restore its financial infrastructure.
Coincidentally, this week the Financial Action Task Force (FATF), the international watchdog responsible for setting global standards on money laundering and terrorist financing, is convening for its periodic plenary meeting. FATF should compel the Lebanese government to take significant measures against Hezbollah’s significant role in its economic system. Since Lebanon’s government is particularly weak, international assistance is essential, alongside genuine pressure on Lebanon. FATF can utilize its tools, including placing Lebanon on the “grey list,” which would require the government to take emergency actions to improve the situation and bring about real, substantive change. During my tenure as chair of a FATF working group, I witnessed time and again how placing countries on FATF’s grey and blacklists can effectively drive internal processes needed to safeguard their economies’ integrity. This is the case here as well.
Without significant action by the Lebanese government and the international community, Hezbollah will be able to restore its financial network quickly. Therefore,the global community must take complementary measures, such as imposing further effective sanctions on Iran and Hezbollah, and continue identifying and confiscating their assets globally.
In conclusion, the strike on Al-Qard Al-Hasan Bank represents a critical blow to Hezbollah’s financial system, but the battle against the organization cannot end here. Hezbollah’s influence in Lebanon extends far beyond the military sphere, and to eliminate the organization, its financial infrastructure must also be targeted. The combination of additional sanctions, increased international pressure, and global economic actions against Hezbollah can aid in its defeat and prevent its recovery.
The writer served as chair of the Israel Anti-Money Laundering and Counter-Terrorism Financing Authority, chaired a working group at FATF, and held the highest international roles held by an Israeli in this field. She is a member of Forum Dvorah.
This article was originally published in Hebrew by N12: www.mako.co.il.