Crime & Justice

Lebanon mulls legislation to lift banking secrecy

By Junaid Salman in Beirut

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Lebanese soldiers clear the road next to a burning bank branch, set ablaze by demonstrators following the funeral in Tripoli of protestor Fawaz al-Samman on April 28th. [Ibrahim Chalhoub/AFP]

The Lebanese parliament must work to ensure that a draft bill to lift banking secrecy is passed into law, financial experts and lawmakers told Al-Mashareq.

The Lebanese cabinet on March 5th approved a draft law to lift banking secrecy that was put forward by Lebanese MP Michel Daher.

The bill pertains to public officials, including those with executive or oversight responsibility at banks, funds and councils, political and non-political associations, the visual, audio, print and digital media and government facilities.

On April 22nd, the Lebanese parliament failed to pass the bill into law, referring it instead to committee for in-depth study and discussion.

Parliament is also considering other legislation proposed by lawmakers related to the matter of lifting and abolishing banking secrecy.

While these bills aim to curb corruption in state agencies, experts say the importance of lifting banking secrecy lies in its contribution to Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) efforts.

Daher's bill calls for the abolishment of bank secrecy, not only for certain groups, such as public officials, but for all bank accounts in existence as of 1991.

'Urgent need to address corruption'

In the draft bill's introduction, Daher said he submitted his proposal "in view of the extraordinary circumstances the country is going through, because the smuggling of illicit funds and corruption are on the rise".

"There is an urgent need to address various corruption-related issues, such as the recovery of looted money, money laundering and other crimes," he said, adding that "the first and main step" is lifting banking secrecy on accounts.

Speaking with Al-Mashareq, Daher stressed the "importance of lifting the banking secrecy to curb corruption and money laundering".

"The banking secrecy law, which was enacted in Lebanon in 1956, was established at the time to attract foreign investments and capital," he said.

"But today it has no use other than helping with tax evasion, corruption, looting and money laundering," he said, noting that it "is more harmful than beneficial to the public interest, which should have priority over personal interests".

"The risks and damages resulting from the exploitation of the banking secrecy law by the corrupt, smugglers and evaders of all kinds of taxes have become formidable, and they are annihilating the rights of individuals and the state alike," he said.

Strengthening AML/CFT efforts

"Lebanon does not need to enact new laws to add to existing ones in order to strengthen AML/CFT efforts, as the Special Investigation Commission has broad powers under Law No. 318/2001," said economist Violette Ghazal al-Balaa.

"The commission can act as soon as it receives a judicial request," she told Al-Mashareq. "It is able to lift the banking secrecy on accounts with banks and financial institutions that are suspected of being used to launder money or finance terrorism."

She stressed the need to respect the independence of the judiciary, "which Lebanon seems to have violated recently" via political disputes that led to the freezing of a number of appointments issued by the Supreme Judicial Council.

The Supreme Judicial Council "has the confidence of all parties, and was capable of appointing independent and impartial judges capable of receiving any request from outside the country to then refer it to the Special Investigation Commission", al-Balaa said.

"Lebanon's serious commitment to combating [money laundering, terrorism financing and corruption] is confirmable through the evaluation process, that was slated for the middle of this year, of [its] AML/CFT system," she said.

This encompasses the operation of the Central Bank of Lebanon, the banking sector and the Special Investigation Commission, in addition to the effectiveness of the system that is in force in the state as a whole, she said.

"Lebanon has laws that combat money laundering and terrorist financing," AML/CFT expert Shawki Ahwash told Al-Mashareq.

"The banks are not lax in this regard, but these laws must be activated and applied," he said.

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