Financial Accounting in Lebanon: Why should banking confidentiality be fully raised?

“Libyan Dibit” – Basma Atwi

After three “mined” attempts to amend the banking confidentiality law, in the governments of Presidents Hassan Diab, Najeeb Mikati and the former parliament, the Council of Ministers in the government of President Nawaf Salam approved the draft law amending banking secrecy on March 27th, a proof of the government’s serious intention to proceed with the reforms required by the International Monetary Fund in preparation for the signature of the agreement with it. This step is good but incomplete, as it was more beneficial, in the opinion of the observers, to cancel the banking secrecy instead of modifying it, if we really want to reveal the reservoirs of corruption before and after the crisis. But, at the same time, they classify it as a first step in the path of exit from the long and most important crisis, in their opinion, is the issuance of applied decrees after the law is passed, so that it does not remain ink on paper.

The draft law stipulated the amendment of paragraphs (e) and (and) of Article 7 of the law related to the confidentiality of banks issued in 1956, and Article 150 of the Credit and Credit Law issued on 1/8/1963, amended by Law 306 issued on 10/28/2022, after the amendment of Article 3 of it (the ninth line) according to the following: A retrospective effect on the date of the issuance of Law No. 306 dated 10/28/2022 … written in every task. ” This project will be referred to the House of Representatives.

Attempts to circumvent 5 years old! The first attempts of the government and the parliament to circumvent the demand to amend the banking secrecy was in May 2020, when the parliament passed the proposal of the “amending the provisions of the banking secrecy”, and limiting the authority to raise the secrecy to the “Special Investigation Commission” with the Central Bank of Lebanon, which was then chaired by the bank’s ruler, Riyad Salama. In June 2020, former President of the Republic, Michel Aoun, refused to sign the law decree, and returned to the Budget and Budget Committee in Parliament, requesting that public prosecution and judiciary be granted the authority to raise banking secrecy as well.

In July 2022, the law was passed for the second time, after many amendments to it in response to a draft law submitted by the Naguib Mikati government in March 2022 in the context of negotiating with the International Monetary Fund. The judiciary has given the authority to access banking secrecy in cases of illegal enrichment and electoral fraud, but, according to observers, it contained many gaps that may be used to evade the lifting of secrecy. After the law was passed, notes were leaked from the International Monetary Fund, most notably the dedication of the monopoly of the Special Investigation Authority, and ignoring the public prosecutor’s reference by raising the secrecy, in addition to excluding the judicial bodies from obtaining information without going through the Special Investigation Authority. Then, President Aoun responded, calling for amendment.

Then the parliament approved it for the third time in its final form in October 2022, and it was in a large percentage of what the IMF requested, until it was finally modified recently.

Abu Al -Zour: Raising the banking company is a door to get out of the gray regulation. Lawyer Dina Abu Al -Zour (member of the Depositors Association) explains to the “Lebonn Deepite” website that “from the conditions of the IMF during negotiations with Lebanon amending the banking confidentiality law, knowing that the most correct expression is the abolition of the banking secrecy law, because we are at a stage in which we must reveal the financial measures that took place in the past years.” And she considers that “this recent amendment set a time period starting from 2022 to today, and is no longer a retroactive effect until 2019, a period that witnessed the smuggling of funds abroad. Therefore, the draft law is a legal amendment that takes into account the procedures for raising banking secrecy from the date of its publication, and everyone who is afflicted by this law must adhere to it.”

She adds: “We are in an exceptional state, and what should happen is to fully raise banking secrecy, because Lebanon no longer benefits from this law in the way on which it was placed, that is, to attract money. Today, we are in a different situation and we are no longer able to cover corruption.” And she stresses that “Lebanon is classified within the gray list, meaning that there are suspicions of money laundering and terrorist financing that hovering around it. To find out how to carry out these operations, banking secrecy must be raised to fight these abuses, as this cannot be done in part and selective in a way.”

She explains that “if we want to conduct an in -depth research on all financial transfers since 2019, it is assumed that there will be an absolute lifting of the banking secrecy. The crisis and during it, because corruption is an interconnected and permanent link, and whoever practices it does not do it for one time, but rather continuously.

He concludes: “This law alone is not enough to restore deposits, but rather a criminal audit must be proceeded to find out what happened in the banks, and in the Central Bank of Lebanon, before and during the crisis, and to know the size of the financial gap and restructure banks.”

Al -Tiny: The company’s lifting must be complete to make accounting for her part. Lawyer Dr. Judit Al -Teni sees that “Amending Law No. 306/2022 is a requirement from the International Monetary Fund, because the fund was not completely satisfied with its content, so the government prepared the draft amendment.” “The most important thing that this amendment contains is that raising the banking confidentiality is retroactively for a period of ten years from the date of the issuance of the law to be issued, while the previous text was raising the banking secrecy retroactively to the date of the issuance of Law 306 on 10/28/2022”.

She adds: “Return back for ten years is a good matter, especially as it includes the stage of October 17, 2019, and if I see that raising banking secrecy must be absolute and complete, away from any timeless, to conduct real and complete accountability. And raising the banking secrecy, according to the text, will affect both the Bank of Lebanon and the Supervision Committee on Banks, and any party assigned to check or control tasks by either of them. “This includes raising banking secrecy from the credit accounts or city, inside and outside the budget, and for any records, documents and information belonging to a legal or real person who deals with any bank or institution.”

And she concludes: “We finally point out that the failure to issue the applied texts of Law 306/2022 to this day has been evidence of the intention of officials not to implement this law and make accountability.”