Lebanese financial prosecutor orders repatriation of funds transferred abroad during crisis

L'Orient-Le Jour

4 days ago

BEIRUT — Financial Prosecutor Judge Maher Chaito has issued a landmark decision, 'based on ongoing investigations,' requiring both individuals and legal entities – including bankers — to repatriate to Lebanese banks sums equivalent to amounts they transferred abroad during the economic crisis — or after Oct. 17, 2019, and 'in the same currency,' Lebanon's National News Agency (NNA) reported Thursday.
Funds are to be reintroduced into the Lebanese banking system 'within two months,' and 'under the supervision of the Financial Prosecutor's Office and in accordance with the conditions it sets,' it further said.
Since the crisis erupted in 2019, political deadlock has prevented the passage of formal capital control legislation – a key condition set by the International Monetary Fund (IMF) to unlock a rescue package. In the meantime, billions of dollars are estimated to have been moved abroad between 2020 and 2023, although no precise figures exist, while the bulk of depositors' funds remain unlawfully trapped in Lebanese banks.
List of individuals concerned to be identified by the BCC
Appointed as financial prosecutor last month, "Judge Chaito was asked to pick up two pending cases – including fund transfers files, which had been initiated by predecessor judge Ali Ibrahim, before being shelved,' a source familiar with the matter, speaking on condition of anonymity, told L'Orient Today.
'Many details of the decision have yet to be published and clarified,' the source noted.
As a first step, the types of transfers to be targeted must be identified, and clear scenarios and thresholds established to determine what qualifies for repatriation, he explained. 'For example, medical transfers and tuition payments are expected to be exempt.'
Once these parameters are set, the BDL's Banking Control Commission (BCC) must, using the information provided by Lebanese banks, draw up a list of account holders whose transfers meet the criteria set by the financial prosecutor.
With the banking secrecy law lifted in April 2025, 'the BCC now has the authority, with judicial authorization, to obtain such lists and forward them to the prosecutor for enforcement,' the source said. Meanwhile, the Special Investigation Commission, which handles money laundering and related cases, can work in parallel to flag transfers that are deemed 'suspicious.'
Individuals may also be identified through other ongoing proceedings, which could stem from 'judges already handling certain cases, whistleblower reports, referrals from the National Anti-Corruption Commission, or from the Special Investigation Commission (SIC) or BDL's Central Council,' tax lawyer Karim Daher told L'Orient Today.
These cases, he explained, relate specifically to individuals who transferred funds abroad after Oct. 17, 2019, in violation of the law — and are pursued under the legal framework in place as of that date.
'For public officials, it would fall under laws on illicit enrichment or embezzlement of public funds. For bankers, it would be prosecuted under existing statutes on bankruptcy, fraudulent bankruptcy, or bankruptcy by default, insider dealing, as well as breach of trust against depositors,' Daher said.
In such instances, bankers, directors, and board members — fully aware that their institutions were insolvent — refrained from paying depositors while transferring their own money abroad. 'These were not bank assets, but personal funds moved out of the country to the detriment of others,' he continued.
Under the relevant laws, they are being ordered to repatriate these sums into the Lebanese banking system, where they will be treated like the funds of other depositors and become subject to the same withdrawal restrictions.
If individuals fail to comply, sanctions — still to be determined — will need to be applied. 'If they don't, the financial prosecutor can recover the funds forcibly under the applicable laws: the anti-money laundering law, the U.N. Convention against Corruption (Chapter 5 on asset recovery), and Law 214/2021 on the recovery of illicit assets,' Daher added.
A boost towards depositors' fund recovery
Once returned, funds will be differentiated between those deemed "eligible" and 'ineligible' through the law aimed at restoring financial balance and returning deposits (formerly called the gap resolution law), which the government is still working on.
If the funds are found to stem from acts of corruption, Daher says, 'they will be seized and transferred to the state under Lebanese law and the Penal Code, or Law 44/2015. 'Illicitly acquired' can mean money laundering, embezzlement of public funds, or other forms of illicit gain.'
Returning funds to the banking system would likely reduce the estimated $80 billion financial gap, while also improving bank liquidity and expanding the pool of resources available for depositor repayment, the source noted.
In August 2020, former disgraced central bank governor Riad Salameh issued Circular No. 154, instructing banks to pressure clients who had transferred more than $500,000 (or the equivalent in other currencies) abroad after July 2017 to return 15 percent of the transferred amounts and place them in a 'special account' frozen for five years. The required ratio increased to 30% for bank board members, major shareholders, or any 'politically exposed persons' holding senior executive, legislative, or administrative positions within the state.
Many provisions of the circular were never implemented, and it carried no legal force, making it effectively unenforceable.