U.S. authorities have blacklisted one of Beirut's major financial institutions, Lebanese Canadian Bank, alleging that it is part of a drug trafficking network that benefited the banned Islamist group Hezbollah.
The bank was involved in a complex scheme in which cocaine was shipped from Colombia and Panama and retailed in Europe and the Middle East, U.S. officials said. They alleged that the proceeds were deposited with LCB in Beirut, wired to U.S. accounts and used to buy second-hand cars that were resold in western Africa.
LCB doesn't move or accept money in Canada, but it was once owned by the Royal Bank of Canada. Lebanese-Canadian investors bought it in 1988, and it has a sales office in Montreal.
The Montreal office is registered with the federal Office of the Superintendent of Financial Institutions, and Canadian federal officials are reviewing LCB's status, Finance Department spokeswoman Stephanie Rubec said.
"[Hezbollah]derived financial support" from the network, which was headed by alleged Lebanese kingpin Ayman Joumaa, said James Freis, head of FinCEN, the anti-laundering arm of the U.S. Treasury Department. He added that the network moved up to $200-million every month.
"LCB - through management complicity, failure of internal controls, and lack of application of prudent banking standards - has been used extensively by persons associated with international drug trafficking and money laundering," Mr. Freis said on Thursday.
The bank issued a statement denying the allegations.
LCB has been sued in Quebec and New York courts by Israeli victims of Hezbollah rocket attacks who say it is liable because it handled wire transfers for the Lebanon-based group.
Royal Bank of Canada is a correspondent bank of LCB, meaning it would handle some Canadian transactions for those seeking to do business with the Beirut-based institution, said RBC spokeswoman Gillian McArdle.
"I can also tell you we are evaluating the situation and we will take any actions deemed appropriate," she said.
In the civil suit filed in 2008 in New York, American Express Bank was also named as a co-defendant because it is a correspondent bank of LCB. "In order to execute U.S. dollar transactions, defendant LCB requires a correspondent bank in the United States through which to carry out those dollar transactions," said a statement of claim.
Top managers at LCB are aware of Mr. Joumaa's illicit activities, Mr. Freis said: "A minority owner of the bank, who concurrently serves as general manager, his deputy, and the managers of key branches are in frequent - in some cases even daily - communication with various members of the aforementioned drug trafficking and money laundering network, and they personally process transactions on the network's behalf. Additionally, LCB managers are linked to [Hezbollah]officials outside Lebanon."
Mr. Joumaa, 47, travels either with Lebanese or Colombian passports, according to the U.S. Treasury's Office of Foreign Assets Control, which enforces trade sanctions. The Treasury Department also said that his brothers Akram, Anwar and Mohamad are drug traffickers.
In its most recent annual report, LCB said it had 665 employees and $5.1-billion (U.S.) in assets.
LCB opened its Montreal office in 2002. "The arrival of these financial companies adds prestige to Montreal's standing in the financial world," then-Quebec-premier Bernard Landry boasted at the time.