Strikes on a Hezbollah-linked bank raise questions about when financial institutions lose protection under international humanitarian law.
On Oct. 20, 2024, Israeli warplanes struck facilities in Beirut connected to Al-Qard Al-Hassan (AQAH)—a financial institution with over 30 Lebanese branches, serving hundreds of thousands of customers. Israel justified the attack by identifying the bank as Hezbollah’s de facto banking arm. While the Israel Defense Forces (IDF) insisted that these strikes were conducted after “extensive intelligence gathering and in strict accordance with international law” to destroy Hezbollah’s missile acquisition capabilities, AQAH officials have maintained that they are a purely civilian institution—creating a precedent that raises urgent questions about when financial infrastructure loses protected status under international humanitarian law (IHL).
In this article, I examine AQAH’s unique position in Lebanon’s financial ecosystem; compare its operations to Western financial institutions that have faced terrorist financing penalties; explore the legal frameworks governing military objectives and economic targets as well as how the U.S. has treated economic targets previously; and ultimately identify the threshold conditions that might legally transform a financial institution’s physical infrastructure into a legitimate military target.
Background on AQAH
AQAH is a nonprofit charity institution operating outside the Lebanese financial system but under a license granted by the Lebanese government. The institution offers interest-free loans and provides credit to individuals who deposit gold as collateral. In the aftermath of Lebanon’s financial collapse in 2019, the AQAH entity became a “vital lifeline for some Lebanese.” It was reported that the AQAH entity had $3.7 billion in loans to 1.8 million people in Lebanon, with approximately 300,000 people currently holding active loans.
Some analysts contend that Hezbollah is not funded through AQAH, suggesting that the money deposited at AQAH belongs to individuals and companies. Analysts have also argued that destroying AQAH branches does not impact Hezbollah’s finances, which are secured through Iranian support and donations from wealthy individuals worldwide.
The U.S. and IDF, in contrast, have maintained that AQAH has provided funding for Hezbollah. In July 2007, the U.S. Treasury Department sanctioned AQAH for its involvement in Hezbollah’s finances, which included providing the group with access to international banking. In May 2021, the U.S. Treasury sanctioned seven individuals for using personal bank accounts to evade sanctions against AQAH and transfer approximately $500 million on its behalf.
Meanwhile, many Western financial institutions have been fined and even prosecuted for similar behavior. In June 2024, Standard Chartered, a major U.K. financial institution, was accused of violating sanctions against Iran by processing over $100 billion in transactions between 2008 and 2013. Experts also identified $9.6 billion in foreign exchange transactions conducted by the bank with individuals and companies designated by the U.S. as funding terrorist groups, including Hezbollah and Hamas. In May 2022, Wells Fargo settled charges for $7 million, admitting to violating federal anti-money laundering laws by failing to report suspicious activity that may have enabled terrorist financing. TD Bank also faced significant consequences in October 2024, pleading guilty and agreeing to pay over $1.8 billion in penalties for violations of anti-money laundering laws and the Bank Secrecy Act.
These cases demonstrate that the actions of AQAH are not isolated—many Western financial institutions conduct operations similar to AQAH’s alleged financial activities, making the question of humanitarian protections for financial institutions a pressing one.
Defining “Military Objective”
International humanitarian law and U.S. policy state that:
civilian objects are generally protected from intentional attack or destruction. However, civilian objects may lose their protections if they are being used for military purposes or if there is a military necessity for their destruction or seizure. Civilian objects may, in such circumstances, become military objectives, and if so, the law of armed conflict permits their destruction.
The U.S. Department of Defense Law of War Manual (DODLWM) and treaties have defined military objectives as either objects or persons that may be attacked. The DODLWM says that military objectives are “any object which by its nature, location, purpose or use makes an effective contribution to military action and whose total or partial destruction, capture or neutralization, in the circumstances ruling at the time, offers a definite military advantage.” It also says that “military action has a broad meaning and is understood to mean the general prosecution of war” and that the “object’s contribution to the enemy’s war-fighting, war-supporting, or war-sustaining capability is sufficient.”
The DODLWM notes that if an object is a military objective, it is not a civilian object and may be made the object of attack. However, it is important to consider the expected harm to the civilian population and to apply the principle of proportionality to an attack on a military target. The principle of proportionality says attacks on military objectives are prohibited if the expected civilian harm “outweighs the anticipated military gain.” Commanders “must make reasonable efforts to reduce the risk of harm to civilians and civilian objects,” ensuring that military actions do not cause excessive harm to civilians relative to the anticipated military advantage.
Defining “Economic Object”
According to the U.S., economic resources supporting military operations or war efforts are considered legitimate military targets. However, many critics—especially those in the international community—oppose the position taken by the U.S. Some have argued for a restrictive interpretation, asserting that only objects directly involved in military action—for example, a factory manufacturing weapons—should be considered military targets. They suggest that “definite military advantage” should be narrowly construed, limited to immediate attacks and excluding remote advantages like reducing an enemy’s long-term economic ability to continue fighting.
These critics also challenge the legality of targeting activities that support a war effort on the basis that this contravenes international law and established norms for armed conflict. Adding to this legal uncertainty, the DODLWM provides only limited examples of legitimate economic targets—specifically “electric power stations critical to a state’s wartime capacity” and “oil refining and distribution facilities”—leaving considerable ambiguity regarding other types of economic infrastructure.
This opposition reflects a broader scholarly and policy debate surrounding war-sustaining objects in armed conflict. As experts have observed, there exists a significant gap between academic literature and state practice on this issue, with the academic community having yet to catch up to the historical record of states’ express and implicit acknowledgment—discussed below—that war-sustaining objects can be lawfully targeted. The divergence between the U.S.’s view and academic opinion is evident in several authoritative sources. For instance, the Final Report of the International Criminal Tribunal for the former Yugoslavia opposed an interpretation of military objectives that would have included war-sustaining targets. Similarly, experts who drafted the 1994 San Remo Manual on International Law Applicable to Armed Conflicts at Sea, the experts who participated in the 2009 Harvard Humanitarian Policy and Conflict Research Manual on International Law Applicable to Air and Missile Warfare, and the majority of the group of experts invited to participate in drafting the 2013 Tallinn Manual all rejected a definition of military objectives that could include such war-sustaining targets.
Previous U.S. Economic Objects
The U.S. expanded its interpretation of economic objects and war-sustaining activities through its strikes on ISIS during Operation Tidal Wave II. In 2014, the U.S. coalition began targeting ISIS controlled oil facilities in Iraq and Syria but determined that these strikes had a minimal impact on ISIS. In October 2015, the coalition began targeting oil transport, including tankers. However, the coalition faced three key challenges while targeting these tankers: The trucks themselves were civilian vehicles, the drivers were civilians, and the oil became a civilian commodity essential to local populations once purchased from ISIS. Despite these concerns, the coalition concluded that ISIS had repurposed the trucks—which would normally be considered protected civilian objects—for military purposes. This, they argued, removed their protected status, making them legitimate military targets. Regarding the civilian drivers, the coalition determined that any accidental injury or death they might suffer would be considered collateral damage, incidental to strikes against the trucks or other legitimate military targets associated with the oil facilities.
The coalition took significant steps to mitigate the risk to drivers, providing prestrike warnings such as leaflet drops, low aircraft passes, and strafing runs to encourage the drivers to abandon their trucks. Furthermore, the coalition assessed the oil being hauled in the trucks as being used by ISIS for a military purpose: ISIS oil was the primary source of funding for military operations, with revenue estimates ranging from $1 million to $2 million a day. Therefore, the oil itself was deemed a legitimate military target, regardless of the truck drivers having purchased it from ISIS. Operation Tidal Wave II was hailed as a tremendous success, cutting ISIS’s oil revenue by half, dismantling their financial infrastructure, and leaving ISIS unable to pay their fighters.
Can a Financial Institution Be a Lawful Target?
The question of whether a financial institution can be legitimately targeted during armed conflict centers on its classification under IHL. Financial institutions typically enjoy protection as civilian objects, but this status is not absolute. The IDF justified its targeting of AQAH branches by claiming they were instrumental in Hezbollah’s ability to launch and buy missiles, suggesting a direct link between the institution’s financial services and Hezbollah’s military capabilities. As mentioned, civilian objects lose their protected status when they make an effective contribution to military action and their neutralization provides a definite military advantage.
The military advantage from targeting AQAH’s physical branches extends beyond mere service disruption to operational degradation of Hezbollah’s financial networks. While digital banking reduces reliance on physical infrastructure, AQAH’s branches serve critical functions that cannot be easily substituted: They house command-and-control centers for financial operations, contain servers and communication equipment essential for transaction processing, and serve as cash distribution points in Lebanon’s cash-dependent economy, where many transactions supporting military procurement occur offline. The destruction of these facilities creates a definite military advantage by forcing Hezbollah to rebuild financial infrastructure, disrupting established money-moving networks, and compelling the organization to develop new, potentially more vulnerable financial channels. This analysis aligns with the requirement that economic contributions be confidently traced through a strong causal connection to an enemy’s military action; these strikes directly impair Hezbollah’s ability to fund and coordinate missile procurement operations, rather than merely creating speculative or easily substitutable disadvantages.
IDF’s strikes also raise important parallels to Operation Tidal Wave II. In both scenarios, economic assets supposedly serving civilian purposes were reclassified as military objectives because they directly sustained combat operations. The AQAH case is particularly complex because the institution simultaneously serves hundreds of thousands of Lebanese civilians while allegedly facilitating Hezbollah’s military financing.
When evaluating strikes against financial institutions, the principle of proportionality requires military planners to balance anticipated military advantage against expected civilian harm. This harm legally encompasses only “loss of civilian life, injury to civilians, and damage to civilian objects”; however, “mere inconveniences or temporary disruptions to civilian life need not be considered.” The IDF’s targeting of AQAH facilities demonstrates this calculus in practice—the military advantage gained by crippling Hezbollah’s missile procurement capabilities outweighed the civilian impact. Importantly, destroying a financial institution’s physical infrastructure typically creates indirect effects, such as disruption of future services, rather than direct civilian harm. The inability to provide future financial services would likely be classified as an indirect or remote harm.
The U.S. position does not require commanders to consider economic harm such as lost income from a deceased relative or unemployment resulting from attacks on facilities like tank factories. Consequently, financial institutions’ physical facilities that house command centers or process terrorism-funding transactions should be considered legitimate targets when expected civilian casualties remain minimal relative to the military advantage gained.
While Western financial institutions like Standard Chartered have faced legal penalties for similar violations of sanctions and anti-money laundering laws, these regulatory approaches may not always provide timely disruption of financial support to terrorist organizations during active conflicts. The fines imposed—even those reaching billions of dollars—sometimes fail to create sufficient deterrence, allowing certain illicit transactions to continue despite regulatory action. The sanctions and designations imposed by the Treasury Department against AQAH were not effective, according to the IDF, which led to the strikes.
When a financial institution becomes significantly involved in a terrorist organization’s financial infrastructure, as alleged in the case of AQAH with Hezbollah, regulatory mechanisms may be too slow to address imminent security threats effectively, and directly targeting the financial institutions may become necessary. As Operation Tidal Wave II demonstrated in the case of ISIS, targeting financial infrastructure can rapidly degrade a terrorist organization’s operational capabilities, potentially shortening conflicts and ultimately saving more civilian lives.
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These strikes create precedent for when financial institutions facilitating terrorist financing might be considered legitimate military targets. The AQAH case suggests that when sanctions and regulatory measures prove inadequate in stemming financial support for terrorist operations, military action may become a legally justified option. As modern conflicts increasingly involve non-state actors using civilian financial networks to sustain military capabilities, clearer international standards are needed to determine when economic targets supporting hostile operations constitute legitimate military objectives, balancing security imperatives with civilian protection.
– Cory Pihl is a lieutenant in the Navy JAG Corps. Published courtesy of Lawfare.
