On April 24, 2025, the Lebanese Parliament passed a law allowing for the lifting of banking secrecy, marking a historical shift for the country’s financial system and ending a legacy dating back to 1956. The measure is part of the financial reforms Lebanon is undertaking in coordination with the International Monetary Fund.
Banking secrecy has been an obstacle to combating tax evasion, financial crimes, and banking administration violations. It served as a shield for banks by preventing the disclosure of financial transactions to the Lebanese authorities, which is why its lifting faced some opposition in Parliament, in a bid to protect the interests of the country’s financial elite. Nevertheless, the law was passed despite attempts to obstruct it, or change it to strip it of its main purpose.
69 years of banking secrecy
In 1956, with the early formation of the banking system under President Camille Chamoun, Lebanon enacted the Banking Secrecy Law. The law explicitly stipulated the confidentiality of information related to customer names and transactions, prohibiting its disclosure to any individual or public authority, whether administrative, military, or judicial.
As such, tax or judicial bodies were not allowed to obtain information on customer accounts from commercial banks. This restriction also applied to foreign authorities. Even the Central Bank’s oversight authority, the Banking Control Commission, lacked the power to access the data related to the clients’ accounts. This was despite the fact that the commission was legally mandated to audit banks’ operations and ensure their compliance with the law.
Lebanon’s banking secrecy model provided a reassuring financial environment, especially for those who preferred to keep their wealth undisclosed
The Banking Secrecy Law was passed during an era of wealth accumulation from oil extraction in the Gulf region. At the time, Gulf investors sought stable banking systems, especially since Gulf countries had not yet developed the financial systems they have today. Lebanon’s banking secrecy model provided a reassuring financial environment, especially for those who preferred to keep their wealth undisclosed. Similarly, when Arab countries like Syria, Egypt, and Iraq experienced waves of nationalization in the 1950s and 1960s, Lebanon’s banking secrecy served as an attractive shield. Wealthy segments in these countries sought to transfer their capital to safer environments, away from oversight or political risk. Likewise, Lebanese expatriates saw banking secrecy in Lebanon as a way to hide their savings from tax authorities in their host countries.
For all these reasons, banking secrecy became one of the key drivers of the banking sector’s prosperity before the onset of the civil war in 1975, aided by the freedom of capital movement afforded by Beirut’s developed financial market. During this period, the number of Lebanese banks grew from nine in 1945 to 85 in 1960, and deposits multiplied nearly 38-fold between 1950 and 1975.
How banking secrecy lost its edge
Over the past two decades, a number of domestic and international developments rendered banking secrecy ineffective in attracting foreign capital, gradually eroding the competitive advantage it had once provided. In contrast, the drawbacks of this model became more pronounced, particularly in terms of obstructing efforts to combat banking violations, illicit operations, and money laundering activities.
In 2016, Lebanon joined the Global Account Tax Compliance Act agreement, which required it to report accounts held by foreign residents in Lebanese banks to their countries of residence. Three years earlier, Lebanese banks had already begun complying with the American Foreign Account Tax Compliance Act (FATCA) law, which obligates them to disclose any accounts held by American citizens to US tax authorities. As such, banking secrecy no longer made Lebanon a tax haven for wealthy foreign residents.
Meanwhile, Gulf financial markets had developed substantially over the past decades, and Beirut lost the monopoly on liberal and advanced financial systems in the Middle East. The UAE, for instance, developed its own financial system into a tax haven, attracting capital from other Gulf nations and eroding Lebanon’s share of the regional market.
A cover for illicit activity
Even after losing its strategic value, banking secrecy continued to cast a long shadow over Lebanon’s ability to regulate and oversee financial activities.
It hindered tax audit procedures that required authorities to access banking data in order to cross-check it with tax declarations, creating barriers that made such verification impossible. This was one of the main reasons behind Lebanon’s failure in building a system of tax control and audit to curb tax evasion, estimated at nearly 50 percent of due taxes. The IMF valued this loss to the Lebanese state at around $4-5 billion annually.
Due to banking secrecy, Lebanese courts lacked access to critical financial information for investigating cases of embezzlement, illicit enrichment, and other financial crimes
Moreover, due to banking secrecy, Lebanese courts lacked access to critical financial information for investigating cases of embezzlement, illicit enrichment, and other financial crimes. A prominent example was the investigation into the alleged embezzlement and money laundering involving long-serving former Central Bank Governor Riad Salameh, during which Lebanese banks refused to hand over account data to Lebanese prosecutors. These banks only complied after pressure from the French judiciary, which was conducting its own investigation into the same charges. This incident was just one of many examples, in which banking secrecy hindered efforts to trace illegal activities within the Lebanese banking system.
Even when Lebanon created the Special Investigation Commission in 2001 under the Anti-Money Laundering Law, with the aim of combating illegal banking activities, the law did not mandate the commission to provide information to judicial, regulatory, or tax authorities. Instead, it retained absolute discretionary power to assess whether any given incident constitutes money laundering, without giving any other authority the ability to appeal this assessment. The commission also remained under the control of the Central Bank governor, creating a clear conflict of interest. For this reason, the commission played no serious role in pursuing money laundering cases within Lebanon’s banking system.
The importance of lifting banking secrecy now
Since the onset of the financial crisis of 2019, which left bank depositors unable to access their life savings in banks, no detailed assessment of banks’ financial positions has been conducted. Such a move is widely considered as one of the necessary first steps toward any viable solution to the crisis.
Meanwhile, calls by reformists to lift banking secrecy have intensified, to open the door to meaningful financial recovery. Addressing the sector’s accumulated losses requires a comprehensive restructuring of Lebanese banks, including the recapitalization and merger of viable banks, and the liquidation of those deemed unsustainable. This can only be done if the authorities are able to audit the banks’ records, in order to estimate the volume of small and medium-sized deposits that must be protected in each bank. At the same time, lifting secrecy is equally essential to investigate pre-crisis transactions, assign responsibility, and ensure accountability.
Since 2020, the IMF has consistently demanded lifting banking secrecy as a prerequisite for reaching a bailout deal for Lebanon. In 2022, Parliament passed some amendments to the Banking Secrecy Law, but they were insufficient for effective transparency. The amendments failed to authorize the Central Bank or the Banking Control Commission to access client names and balances, and did not define clear mechanisms for lifting secrecy for judicial use or tax audit.
Despite five years of external and popular pressure, no meaningful reform was achieved
Despite five years of external and popular pressure, no meaningful reform was achieved. The opposition to lifting banking secrecy was part of a broader effort by the powerful banking lobby to derail all the reforms Lebanon has needed since 2019 in order to recover from its financial crisis. But in early 2025, the economic reform process gained momentum following political shifts after the war with Israel, culminating in the enactment of the new Bank Secrecy Law in April 2025.
Several factors facilitated the law’s passage, including the composition of Prime Minister Nawaf Salam’s government, which included prominent reformist figures, making it easier to draft the proposal within the government. Parliamentary approval was also facilitated by international pressure, such as the one applied by the Quintet Group, composed of the United States, France, Egypt, Saudi Arabia, and Qatar.
Key gains in the bank secrecy lifting law
The new law introduces significant provisions to facilitate the fair restructuring of the banking sector. This process is expected to include auditing the banks’ balance sheets and assessing their ability to continue operating.
Lifting bank secrecy granted the Central Bank and the Banking Control Commission access to banking data, including for audit firms appointed by the Central Bank. This enables oversight bodies to rely on specialized auditors, picked by the Central Bank, to evaluate each bank individually and investigate potential violations by bank management.
The law applies retroactively for up to 10 years, covering all banking operations since 2015. This enables regulators—the Central Bank and the Banking Control Commission—to revisit pre-crisis transactions and reclaim illegally obtained profits made by banks’ shareholders at the expense of the depositors. In fact, the bank restructuring proposal prepared by the government mandates this course of action.
Most importantly, the law’s main mandate of lifting banking secrecy is not limited to the bank restructuring process; it extends to routine oversight, even after restructuring is complete
Most importantly, the law’s main mandate of lifting banking secrecy is not limited to the bank restructuring process; it extends to routine oversight, even after restructuring is complete. The law clearly allows the Central Bank and the Banking Control Commission to access client names, account balances, and any banking records.
The law was not passed without pushback from groups linked to the banking sector. Some members of parliament from various political blocs tried to introduce amendments limiting its scope, echoing a maneuver from 2022. Meanwhile, the banking lobby continued its media campaign against the law, arguing it would undermine depositor confidence. Ultimately, international pressure, particularly from the United States, prevailed. Perhaps the clearest sign of this pressure was the law’s swift ratification by the Parliament’s General Secretariat, and its same-day signing by both the president and prime minister.
What comes next?
The immediate challenge is enabling the Central Bank and the Banking Control Commission to use the law effectively by auditing the banks’ assets and liabilities, and assessing their financial positions. Initiating a comprehensive audit process in the banking sector requires a high degree of determination on the part of the Central Bank, in order to confront political pressures from actors who will not welcome these measures. Chief among them is the banking lobby, which holds significant influence over political life.
The next step is to audit transactions from the last 10 years, to identify the causes of losses and establish fair accountability
The next step is to audit transactions from the last 10 years, to identify the causes of losses and establish fair accountability. This means that losses should be borne by those responsible, particularly those who profited unlawfully at the expense of depositors. This stands in contrast to the policies adopted by the banking sector since 2019, which have placed the heaviest burden on depositors by withholding deposits or repaying them at significant discounts.
To continue the reform process, Parliament must now pass the Bank Restructuring Law, already adopted by the government as a draft bill. This law will overhaul the Higher Banking Council—the sector’s main regulatory authority—and specify the powers of the Banking Control Commission. It will also define criteria for identifying viable banks for recapitalization (injecting new funds into the banks through contributions made by current or future shareholders) versus those to be merged or liquidated.
Finally, the most critical step remains to be the passage of the Financial Stability Law, or Financial Gap Law, which has not yet been approved as a draft bill. This law is fundamental to resolving the banking crisis, as it will define how to address the existing loss gap and determine the level of deposit protection. Passing it transparently and fairly is not merely a technical milestone, it is a decisive step toward restoring trust, delivering justice to depositors, and halting Lebanon’s ongoing collapse.
Currently, the main challenge, particularly on the part of the Central Bank and the Banking Control Commission, is to begin making use of the legislation that lifted banking secrecy. This requires the commission to start auditing banks’ balance sheets, to assess the financial condition of each individual bank, and to form a clear picture of the portion of deposits the banking sector can currently guarantee. It also necessitates launching a detailed audit of the banking practices carried out over the past years. Without these steps, the lifting of banking secrecy will not contribute to achieving justice for depositors.
Ali Noureddeen is a Senior Inclusive Economies Associate at TIMEP, focusing on issues related to fiscal policies, socioeconomic inequalities, and social protection in Lebanon.