Demonstrators prepare to burn a picture of former Lebanese central bank chief Riad Salameh, during a protest organized by Depositors’ Outcry, in support of his arrest, at the Justice Palace in Beirut, Lebanon. Reuters

Lebanon’s former Central Bank governor Riad Salameh has been arrested, imprisoned, and is due to l appear in court today to contest a charge of embezzling $40 million from the bank. He faces further allegations of embezzlement, money laundering, illicit enrichment, tax evasion at home and abroad. He also operated the largest phoney investment scheme the world has seen. Salameh could be Lebanon’s first top financial figure to be held accountable for his alleged crimes. Since he could implicate others, the judiciary has moved against him with caution and deliberation until cases can be made and won.

Salameh was the world’s longest serving central bank governor until July 2023 when he left his post at the end of his fifth term under a cloud. He had been lauded for stabilising the country’s economy during the 15-year civil war and maintaining the value of its currency during the 2008 global financial melt down.

While in charge of the bank he had also contributed considerably to Lebanon’s financial crisis which began in mid-2019. The value of the Lebanese currency against the US dollar has fallen by 90 per cent, the economy has contracted, and foreign exchange reserves have been depleted. The World Bank has ranked Lebanon’s economic crisis as being among the world’s worse in 150 years.

Salameh left US investment firm Merrill Lynch to be appointed Central Bank governor in 1993 by then Prime Minister Rafik Hariri. During Salameh’s 30-year tenure he adopted risky schemes which were sometimes profitable for the Lebanese state but eventually led to financial ruin for the country and its citizens.

His actions began to catch up with 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 organised crime watchdog reported that Salameh owned offshore firms holding $100 million in property in Britain, Germany, and Belgium. At the end of that year, an audit began of Lebanon’s financial system to identify political and business figures who had evaded banking restrictions to export funds abroad. In 2021, France and Germany began to investigate money laundering by Salameh. During 2022 Salameh dodged a Lebanese summons for questioning over enrichment and laundering and was charged with embezzling $300 million from the Central Bank between 2002-2015. In May 2023, at the request of a French judge Interpol issued an international arrest warrant for Salameh after he failed to appear in court over allegations of forgery, money laundering, and embezzlement. Nevertheless, he remained in charge of the Central Bank until July 2023 when his fifth term ended normally.

The current $40 million case is the tip of the iceberg which has sunk Lebanon’s banking sector and shrivelled Lebanon’s once vigorous economy. Salameh’s local partner was brokerage firm Optimum. Between 2015-2018, Salameh allegedly received $111 million in illicit commissions from the bank’s dealings with Optimum. It has been investigated for allegedly manipulating financial statements and concealing Lebanon’s financial losses, according to Beirut’s naharnet.com. An Optimum probe 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 charged Salameh with illegally acquiring hundreds of millions of dollars through Virgin Islands-registered Forry Associates, owned and run by his brother Raja Salameh. France, Germany, and Luxembourg seized $135 million in assets, including luxury properties, following an investigation of Salameh and four associates who are accused of embezzling $335 million between 2002 and 2021. Following French and German arrest warrants and Interpol’s red notice he could be detained anywhere outside Lebanon. Consequently, he has remained at home as Lebanon does not extradite its citizens. This exposed him to homegrown prosecution. The US, Britain and Canada have sanctioned him.

Mount Lebanon’s energetic Judge Ghada Aoun has lauded Salameh’s arrest as a “historic event,” and has demanded he appear in her court on Wednesday to face other charges. She has warned that the case must proceed to the end “so that the Lebanese people believe that the process of combating corruption has really started in Lebanon.” She pointed out that dozens of subpoenas have been issued against him for his part in granting billions of dollars worth of nonperforming loans but “unfortunately they remained without enforcement by security agencies until this date.” She asked, “Hasn’t the time come to enforce them?” On October 17th, 2019, Lebanese from all communities poured into the country’s streets and squares to protest the economic crisis and demanded 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 which was the legacy of French colonial rule. According to this model the president had to be a Maronite Catholic Christian, the prime minister a Sunni Muslim and the speaker of parliament a Shia Muslim. The uprising was spontaneous and largely cheerful, but leaderless. The movement for change floundered and dissolved after four months, leaving Lebanese to cope with the consequences of mismanagement and corruption and prolonged political deadlock.

On August 4th, 2020, a large quantity of ammonium nitrate stored improperly in Beirut port, killing 218, injuring 7,000, and rendering 300,000 homeless. Property damage was estimated at $15 billion. Investigations implicated port officials who were arrested and released and politicians who escaped accountability and the prosecuting judge made no headway in his investigations and laying charges. On the anniversary every year, families of victims demand action but there is none as powerful interests are involved.

Meanwhile, between 2018-2021 household income plunged while the poverty rate soared from 30-35 per cent to 85-90 per cent, decimating the middle class. Professionals and skilled workers emigrated and Lebanese who remained have suffered power cuts, shortages of medicines, lack of adequate health care, and inflation. Banks rationed withdrawals from personal and business accounts, prompting desperate clients to stage bank robberies to access savings and current deposits.

Lebanon’s political system has been deadlocked. Parliament has failed ten times to elect a president after ex-president Michel Aoun retired in October 2022. The caretaker government under Prime Minister Najib Mikati cannot enact major reforms required to qualify Lebanon for injections of funds to rescue the economy.