Charges are brought against Lebanese banker Salameh

Former Lebanon Central Bank governor Riad Salameh has been arrested and detained. He is due to appear in court today to face charges of embezzling $40 million from the bank. He faces further charges of embezzlement, money laundering, ill-gotten gain and tax evasion at home and abroad. He also ran the world’s largest sham investment scheme. Salameh could be Lebanon’s first major financier to be held accountable for his alleged crimes. Because he could also incriminate others, the judiciary is taking a cautious and cautious approach to his case until cases are pending and can be won.

Salameh was the world’s longest-serving central bank governor until he left the post under ill-fated circumstances at the end of his fifth term in July 2023. He was praised for stabilising the country’s economy during 15 years of civil war and maintaining the value of the currency during the 2008 global financial crisis.

During his tenure as bank chief, he also contributed significantly to the Lebanese financial crisis that began in mid-2019. The value of the Lebanese currency against the US dollar has fallen by 90 percent, the economy has shrunk, and foreign exchange reserves have been depleted. The World Bank has classified Lebanon’s economic crisis as one of the worst in the last 150 years.

Salameh left U.S. investment firm Merrill Lynch to be appointed central bank chief by then-Prime Minister Rafik Hariri in 1993. During his 30-year tenure, Salameh implemented risky schemes that were sometimes profitable for the Lebanese state but ultimately led to the financial ruin of the country and its citizens.

His actions came back to haunt him in July 2020, when an ad hoc group of Lebanese lawyers accused him of mismanagement and embezzlement of bank funds. A month later, the Organized Crime Watchdog reported that Salameh owned offshore companies with assets worth $100 million in Britain, Germany and Belgium. Late that year, an audit of Lebanon’s financial system began to identify politicians and businessmen who had circumvented banking restrictions to export funds abroad. In 2021, France and Germany began investigating Salameh’s money laundering. In 2022, Salameh evaded a Lebanese summons for questioning on enrichment and money laundering charges and was charged with embezzling $300 million from the central bank between 2002 and 2015. In May 2023, Interpol issued an international arrest warrant for Salameh at the request of a French judge after he failed to appear in court on charges of forgery, money laundering and embezzlement. Nevertheless, he remained at the head of the central bank until July 2023, when his fifth term ended.

The current $40 million case is the tip of the iceberg that has plunged Lebanon’s banking sector into the abyss and caused the once-strong Lebanese economy to shrink. Salameh’s local partner was brokerage firm Optimum. Between 2015 and 2018, Salameh allegedly received $111 million in illegal commissions from the bank’s dealings with Optimum. The bank is under investigation for allegedly manipulating financial reports and concealing Lebanon’s financial losses, reports Beirut-based naharnet.com. An investigation into Optimum was launched in July 2023, when Salameh was questioned shortly before leaving the bank and his Lebanese assets were frozen.

Half a dozen European countries have accused Salameh of illegally acquiring hundreds of millions of dollars through the Virgin Islands-registered company Forry Associates, owned and run by his brother Raja Salameh. France, Germany and Luxembourg seized $135 million worth of assets, including luxury properties, after investigating Salameh and four accomplices accused of embezzling $335 million between 2002 and 2021. According to French and German arrest warrants and Interpol’s Red Notice, he could be arrested anywhere outside Lebanon. Consequently, he has stayed at home because Lebanon does not extradite its citizens. This exposed him to prosecution at home. The US, UK and Canada have imposed sanctions against him.

Mount Lebanon’s forceful judge Ghada Aoun has hailed Salameh’s arrest as a “historic event” and demanded that he appear in her court on Wednesday to face other charges. She has warned that the case must be carried through to the end “so that the Lebanese people believe that the process of fighting corruption in Lebanon has truly begun.” She pointed out that dozens of summonses were issued against him for his involvement in issuing billions of dollars in bad loans, but “regrettably, they remained unenforced by the security authorities to date.” She asked: “Isn’t it time to enforce them?” On October 17, 2019, Lebanese from every community flocked to the streets and squares of the country to protest the economic crisis and demand the resignation of the entire political class. They adopted the slogan “All of you means all of you!” They called for the overthrow of the sectarian regime that was the legacy of French colonial rule. Under this model, the president had to be a Maronite Catholic, the prime minister a Sunni Muslim, and the speaker of parliament a Shiite Muslim. The uprising was spontaneous and largely joyous, but leaderless. The movement for change failed and disintegrated after four months. The Lebanese had to deal with the consequences of mismanagement and corruption, as well as a continuing political impasse.

On August 4, 2020, a large amount of ammonium nitrate was improperly stored at the port of Beirut. 218 people died, 7,000 were injured, and 300,000 were left homeless. Material damage was estimated at $15 billion. Investigations have involved port officials being arrested and released, and politicians evading accountability. The prosecuting judge has made no progress in his investigation and indictment. Every year on the anniversary, the families of the victims demand action, but nothing happens, as powerful interests are at play.

Meanwhile, between 2018 and 2021, household incomes fell while poverty rates rose from 30-35 percent to 85-90 percent, decimating the middle class. Skilled and skilled workers emigrated, and Lebanese who remained in the country suffered power outages, drug shortages, inadequate health care, and inflation. Banks rationed withdrawals from personal and business accounts, prompting desperate customers to stage bank robberies to get their hands on savings and checking deposits.

Lebanon’s political system is deadlocked. Parliament has failed to elect a president 10 times since former President Michel Aoun retired in October 2022. The transitional government led by Prime Minister Najib Mikati is unable to implement major reforms needed to make Lebanon eligible for cash injections to save the economy.