Between Iran's money and the "cash economy"... Hezbollah's financial file under the microscope

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Circulating reports about Hezbollah receiving $200 million from Iran to support displaced families continue to raise widespread controversy in Lebanon and abroad, and raise questions about the mechanisms for transferring funds to the party despite the severe US sanctions imposed on Tehran and Hezbollah.

On the other hand, US State Department spokesman Tommy Pigot denied the validity of these reports, considering them “an attempt to polish the party’s image,” and stressing that Washington is continuing the policy of imposing sanctions on Iran and its arms in the region, in addition to supporting the Lebanese government in efforts to rebuild the south.

However, circulating reports address the issue of Iranian funds reaching Hezbollah for the first time since the outbreak of war between Israel and the party on March 2.

Talking about Iranian funding for the party is not new, as the former Secretary-General of Hezbollah, Hassan Nasrallah, previously announced in a 2016 speech that Iran represents the only source of funding for the party and its military arsenal.

For its part, diplomatic sources confirmed to Al-Arabiya.net/Al-Hadath.net that the administration of US President Donald Trump is “continuing vigorously with the policy of imposing sanctions on Iran and drying up the sources of funding for its arms in the region, especially Hezbollah.”

She also stressed "the need for the Lebanese state to play its role in assuming its social and humanitarian responsibilities towards the Lebanese, especially in the south, so as not to allow social institutions affiliated with Hezbollah to benefit from the absence of its official bodies on the ground."

The sources also stopped at the “Al-Qard Al-Hassan” institution, the main financial arm of Hezbollah that provides loans in exchange for mortgages of gold, indicating that “Washington stresses the need for the Lebanese state to take the necessary measures against it, withdraw its license, and close the remaining branches of it, especially since it is included in the US sanctions regulations.”

This institution benefited, according to economic and financial experts, from the spread of the “cash economy” and the disruption of the work of commercial banks to expand the scope of its operations in Lebanon.

While the sources indicated, "It is necessary for Lebanon to begin implementing the required economic and financial reforms, including restructuring banks, as a basic step to combat money laundering and smuggling and combat the cash economy from which Hezbollah has benefited."

For his part, financial expert and political activist Amir Miqdad told Al Arabiya.net/Al-Hadath.net that “Hezbollah has a parallel economy that includes social and financial institutions inside and outside Lebanon, especially in Africa and South America, which are used to secure financial resources and bring money into Lebanon.”

Miqdad added that the financial crisis that erupted in 2019 led Lebanon to rely increasingly on the “cash economy,” which allowed the flow of money outside the traditional control exercised by banks.

He also pointed out that Hezbollah's financing mechanisms have changed over the years, explaining that in previous periods, Iran allocated up to $700 million annually to the party.

He also added that the party has “a parallel economy whose size is estimated at about $250 million annually, and includes social and financial institutions affiliated with it, such as “Al-Qard Al-Hassan,” cross-border smuggling networks, and activities related to the contraband trade and money laundering.”

Miqdad, who prepared a detailed study with numbers entitled “The Salaries and Financing System in Hezbollah,” explained that among the financing mechanisms used by the party is the so-called “clearing” system, whereby an entity outside Lebanon pays money to a specific party, in exchange for another entity inside Lebanon paying the amount to the beneficiary after receiving specific commissions, without the funds being transferred directly through traditional banking channels.

He also pointed to the role of some exchange and money transfer companies, which were previously classified by the US Treasury among those linked to financing Hezbollah.

According to Miqdad, financing operations also include what is known as “value trade,” where companies and commercial activities are used as fronts to transfer financial value in indirect ways, a mechanism classified as money laundering methods.

The reports regarding Iranian financing of Hezbollah came days after a meeting between Lebanese Prime Minister Nawaf Salam and US Treasury Secretary Scott Besent in Washington, to discuss the path of economic and financial reforms in Lebanon.

According to a statement issued by Salam’s media office, the meeting discussed efforts to combat the monetary economy and limit the use of funds outside the official financial system, in addition to enhancing transparency and compliance and combating money laundering and terrorist financing, which contributes to restoring confidence in the Lebanese financial sector and enhancing its integration into the global financial system.