Will cash transfers make a comeback?

Lebanon’s ongoing financial collapse has made every regulatory step a test of trust. The latest directives from Banque du Liban require anyone transferring more than $1,000 to declare the source of their funds, sparking concern among money transfer companies and their clients.

The new rules include filling out the RF1 form and, where needed, undergoing Know Your Customer (KYC) procedures. Some transfers now require proof of salary, tax documents, or even photographing the client at the branch. These measures are unusual compared to other countries on the international gray list and have made transfers more cumbersome and time-consuming.

While the aim is to combat illegal activity and improve financial transparency, the measures could produce unintended consequences. Many users of money transfer services do not have bank accounts, raising the question of whether Lebanon can realistically enforce financial oversight when thousands rely on transfers for daily living.

Excessive documentation requirements may push people away from official channels, possibly toward cash-based transfers outside the regulated system, the very scenario the regulations aim to prevent. Money transfer companies warn that while oversight is necessary, it must remain reasonable and practical, so that compliance is possible without discouraging usage.

Global standards

The new rules reflect Lebanon’s broader struggle to align with international financial standards. Declaring sources of funds for transfers over $1,000 is not unique to Lebanon but is part of global measures aimed at reducing money laundering and financial crimes. For a country seeking to exit the grey list and maintain access to international markets, updating regulatory tools is essential, even if unpopular domestically.

At the same time, regulations alone cannot restore confidence in Lebanon’s banking system. Without broader financial reforms, including efforts to return liquidity and restructure banks, regulatory measures may improve appearances but will not address the root causes of the collapse.

With billions of dollars flowing annually through both banks and money transfer companies, the challenge is clear: enforcing transparency while preserving the lifeline that transfers provide to thousands of Lebanese families. Striking that balance will be crucial for both the sector’s survival and the population’s daily financial security.