The Financial Action Task Force (FATF) has failed to address Libya’s systemic non-compliance with anti-money laundering (AML) and counterterrorism financing (CFT) standards for over a decade, enabling rampant financial crime and politically motivated restrictions on civil society, according to a new shadow report. Despite Libya’s failure to meet 90% of FATF’s 40 recommendations, the global watchdog has never conducted a mutual evaluation report. This has allowed allowed systematic failures to fester, such as the Central Bank of Libya’s (CBL) dominance over the Financial Intelligence Unit (FIU), unregulated hawala networks facilitating 80% of foreign currency transactions.
Additionally, FATF’s refusal to scrutinize Libya’s framework has legitimized the Central Bank of Libya’s (CBL) crackdown on numerous civil society groups under Circular No. 3 (2016), restricting all transactions related to civil society organisations using a non-risk-based approach. With many banks halting services to NGOs and the CBL being able to freeze accounts for lengthy periods, these organisations have been compelled to rely on black market transactions for their vital operations. Meanwhile, Libya remains one of four countries globally without a dedicated terrorism financing law, relying on outdated Penal Code articles while prosecuting zero terrorism financing cases since 2020.
The report highlights FATF’s double standard: while grey-listing Türkiye, UAE, and Morocco for similar deficiencies, it has ignored Libya’s CBL-controlled Financial Intelligence Unit (FIU), which refuses to share data with regulatory bodies and operates under direct political influence. This inaction coincides with a 40% depreciation of the Libyan dinar since 2020 and correspondent banks severing ties over compliance risks, repeating liquidity crises seen during Libya’s 2015–2019 economic collapse.
The report urges FATF to expedite Libya’s evaluation and enforce reforms, including decoupling the FIU from CBL control and regulating high-risk sectors like cryptocurrency mining. Without action, FATF risks endorsing a “lawless environment” where financial crime and repression thrive unchecked.
