Lebanese parliament lifts secrecy in cases of corruption, terrorism

Country continues to struggle to regain confidence of donor community.
Friday 29/05/2020
Lebanese Speaker of the Parliament Nabih Berri wearing a face shield attends a legislative session in Beirut, May 28. (Reuters)
Lebanese Speaker of the Parliament Nabih Berri wearing a face shield attends a legislative session in Beirut, May 28. (Reuters)

BEIRUT--Lebanon’s parliament May 28 passed a law to lift banking secrecy for public officials suspected of corruption or funding terrorism as the country struggles to regain the confidence of international financial institutions and donor community.

Accusations of corruption, money laundering and terror financing have dogged the Lebanese financial system. Many such accusations have been linked to the powerful Shia party Hezbollah.

The move to lift banking secrecy for accused public officials came after months of mass protests against perceived government mismanagement and corruption.

The law concerns “everyone who deals with public affairs, elected or nominated, lawmaker, mayor, judge, officer or adviser,” parliament budget committee chairman Ibrahim Kanaan said. 

It covers suspected cases of “corruption, as well as funding terrorism, money laundering, and funding electoral campaigns,” he said.

According to Kanaan, only the Central Bank’s Special Investigation Commission and a still-to-be-formed National Anti-Corruption Commission can implement the law.

Mass protests erupted last year as Lebanon hurtled into its worst economic crisis in decades — now sharply exacerbated by the coronavirus pandemic.

Banks have imposed crippling controls on ordinary depositors, including a ban on transfers abroad and a progressive cap on dollar withdrawals.

But still reports have emerged of mass capital flight, angering campaigners.

Though some regarded the latest parliamentary move as positive, lawyer and activist Nizar Saghieh described it as toothless and lambasted the final version of the bill for not allowing judges to independently order a disclosure.

The Central Bank’s commission “has always had this ability to be able to lift secrecy as soon as there is the slightest suspicion of money laundering,” he said.

But “they haven’t done it, for example recently when billions were transferred abroad,” he added.

Parliament is expected to continue to study the draft law on capital controls, which aims to regulate the informal restrictions imposed by banks on depositors in recent months.

After defaulting on its ballooning debt in March for the first time, Lebanon last month approved a rescue plan and this month entered talks with the International Monetary Fund (IMF) in a bid to secure billions in international aid.

 “The discussions are constructive and cover many areas including capital controls, financial sector restructuring and structural reforms,” an IMF spokesperson said on May 27.

 The draft capital law aims to protect what is left of Lebanon’s hard currency reserves, MP Alain Aoun said.

Lebanon is in throes of an acute financial crisis seen as the biggest threat to its stability since the 1975-90 civil war.

The local currency has lost more than half of its value since October as hard currency has become ever more scarce and depositors have been frozen out of their accounts.

With no law to stop capital flight, banks have been applying informal restrictions on cash withdrawals and blocking most transfers abroad since the crisis erupted.

But critics say these restrictions have been selectively applied and money has continued to leave the system.

The draft allows annual transfers up to $50,000 for reasons including medical bills, loans, foreign taxes and the purchase of essential goods. It would be in place for one year and could be extended.

“The aim is to prevent selective transfers of funds done by the banks for some privileged clients – transferring millions abroad for some while some here cannot get $100 from their account,” Aoun said.