A New York-based corporation conducted a forensic audit of Lebanon’s central bank, and the results uncovered years of malfeasance by the bank’s former governor and $111 million in “illegitimate commissions,” according to the company’s report.
This is the most recent development in the drama of Riad Salameh, the 73-year-old former governor of Lebanon’s central bank, who was accused of being responsible for the country’s economic collapse and left his 30-year career as governor last month. A copy of the 331-page Alvarez & Marsal dossier was delivered to parliament on Friday. The International Monetary Fund and the rest of the world made the audit one of their top requests after losing more and more faith in crisis-torn Lebanon over time. Alvarez & Marsal and the government of Lebanon agreed to a contract in September 2021, but the audit eventually came to a standstill. It covers the years 2015 to 2020; the collapse of Lebanon’s economy started in October 2019. According to Alvarez & Marsal, the audit was “significantly delayed and slowed” by the central bank’s “refusal to provide direct access to its systems and to allow work to be conducted” on its property. One section of the study focuses on, among other things, the so-called financial engineering technique that the central bank began using in 2015 to let local lenders solicit foreign dollar deposits and then urge the banks to deposit the dollars at the central bank. In exchange, lenders received interest rates that were higher than those of the global market. The paper stated that financial engineering was expensive. The foreign currency deficit at the central bank increased significantly from a surplus of $7.2 billion at the end of 2015 to a deficit of $50.7 billion at the end of 2020. According to the article, the central bank’s 119% increase in deposits denominated in foreign currencies is what caused this. In response to suspicions of corruption, the US, UK, and Canada imposed sanctions on Salameh and a few of his close relatives and colleagues on Thursday. In addition, Salameh and a number of his friends are being looked at by France, Germany, and Luxembourg for potential financial crimes such as unjust enrichment and the laundering of $330 million. In May, Salameh received Interpol alerts from Berlin and Paris. But Lebanon doesn’t turn over its nationals to other nations. The paper also notes $111 million in unauthorized commissions from 2015 to 2020, saying they appeared to be part of a plan that Lebanese and foreign prosecutors are looking into. This is likely a reference to Raja Salameh, the brother of the former governor. There have been rumors that Raja Salameh’s brokerage company, Forry Associates Ltd., was engaged by the Lebanese central bank to handle government bond sales, from which the company received $330 million in commissions.
