Corruption in Lebanon spans across all sectors and levels of society, becoming an essential component of the country’s governance system. According to the Corruption Perceptions Index (CPI) in 2019, Lebanon ranked in the 137th place among 180 countries on the list.
Corruption in Lebanon in all its forms - bribery, patronage, embezzlement,
nepotism and extortion – leads to misuse of government power and public funds,
facilitates criminal activities, and dramatically affects the economic situation
of the country.
The main reason behind corruption in Lebanon
The main reason behind corruption in Lebanon is the weak legal and governing systems based on power-sharing formula, through which the state resources are shared among the various sectarian parties lacking fair distribution for the benefit of all citizens.
Corruption has become normalized
in the Lebanese society, resulting in widespread lack of awareness on causes
and consequences of corruption and the alienating anti-corruption agencies and
watchdogs.
On the evening of October 17th 2019, mass protests against the government mismanagement and corruption allegations erupted, as Lebanon hurtled into its worst economic crisis in decades. The countrywide protests and anger have been directed against the entire political establishment - in power since 1991 - and responsible for the country’s dire economic situation.
Nevertheless, one of the public demands is to lift the
banking secrecy covering the transactions made over the last few decades, in an
attempt to retrace the corruption trails.
Banking secrecy - otherwise known as bank-client confidentiality - binds all financial entities regulated by the Central Bank of Lebanon to absolute secrecy with respect to clients' personal and account-related information and can only be lifted under very limited circumstances.
It is worth mentioning that banking secrecy was adopted in
Lebanon in 1956, aiming to attract investors from all over the world and to
create financial stability to the country. While the concept has become
obsolete in most countries, Lebanon is among the very few in the world where
banking secrecy remains applicable to this day.
In May 2020, the Lebanese parliament adopted a law to
lift banking secrecy for public officials including those dealing with public
affairs, elected or nominated, lawmaker, mayor, judge, officer or adviser.
Banking Secrecy
Lifting banking secrecy would theoretically allow the government to track the money invested in the Lebanese public infrastructure for the past 30 years. However, according to the law, the Central Bank’s Special Investigation Commission and the National Anti-Corruption Commission (the latter is still to be formed) are the only commissions able to enforce this law.
While the Central Bank’s commission has always had the ability to
lift secrecy as soon as there is the slightest doubt of money laundering or
other criminal activities taking place, not doing so has made the commission
prone to public distrust.
The law is ineffective
According to local activists and legal experts, the law does not allow judges to independently order a discloser on a bank account,
rendering the law “ineffective”. The same sources added that lifting banking
secrecy for officials in Lebanon is not enough especially when the parties
creating, monitoring and customizing laws are the same parties responsible for
the three-decades-long corruption and mismanagement allegations of the
country’s financial resources.
At the time of writing, the country continues to nose dive towards more uncertainties as the Lebanese currency continues to lose its value. While the official rate is still pegged to the dollar, the LBP to USD exchange rate in the local market today reached the 4,700 mark, when it was consistent at 1,515 just one year ago in 2019.
Article written by Joe Boutros https://www.linkedin.com/in/joe-boutros-320195103/
Senior Researcher at Cedar Rose
International Services Ltd.