Six years into Lebanon’s banking collapse, Riad Salameh, the former Central Bank governor whose policies led to the crisis appeared on television to defend himself. He had been released just two months earlier following a year of pretrial detention that produced no serious investigation into the most serious allegations against him. The fact that Salameh was sitting for TV interviews rather than facing courtroom trials, while much of the Lebanese population struggled under the weight of the crisis, underscored the depth of impunity in Lebanon.
Since the economic collapse in 2019, the country has witnessed little or no progress toward justice and accountability. It took a shake-up of the political system following the war with Israel in 2024 for the country to agree on a path forward, and for the state to take tangible measures to enable justice. Such efforts, however, continue to face immense push back from interest groups, mainly the influential banking lobby and its political allies.
Developments in recent months have opened the door to meaningful progress, notably the passing of reform-oriented legislation, despite its flaws, and ongoing efforts to enact additional laws
The financial crisis has had devastating consequences for Lebanon’s social fabric and the living standards of its population. The crisis manifested across three fronts: monetary instability that led to the collapse of the national currency; a banking meltdown that wiped out citizens’ savings; and a fiscal breakdown that eroded state finances, undermined public sector funding, and crippled debt repayment.
A sustainable path out of the crisis requires economic recovery plans grounded in accountability. Thorough audits are needed to determine the root cause of the collapse, not only to distribute losses fairly on the basis of accountability, but also to gut the culture of impunity and ensure that past financial crimes are not repeated. Developments in recent months have opened the door to meaningful progress, notably the passing of reform-oriented legislation, despite its flaws, and ongoing efforts to enact additional laws. The government has also pledged executive measures, including the launch of forensic audits into the banking system.
A Ponzi scheme
Over the past few years, various forms of financial misconduct gradually came to light, each contributing to Lebanon’s descent into financial collapse. Some of these actions took the shape of officially sanctioned policies, justified in the name of public interest.
Under the banner of financial engineering, the Central Bank led by Salameh created incentive schemes for commercial banks to deposit their clients’ funds with it in exchange for exceptionally high and immediate returns, sometimes reaching 35 percent. While the Central Bank justified these operations as a way to bolster foreign currency reserves, the outcome was staggering: the Central Bank burnt through tens of billions of dollars paying bankers’ profits, with depositors ultimately footing the bill.
When these operations began in 2015, Lebanon was already running a $3.3 billion annual balance of payments deficit, meaning that hard currency outflows from the country exceeded inflows by that amount. To rationalize its schemes, the Central Bank argued it needed to attract foreign currency to maintain liquidity and stabilize the Lebanese pound. Yet the magnitude of losses incurred through financial engineering far outweighed the potential impact of the limited depreciation of the currency it was meant to prevent.
By 2019, Lebanese banks had funneled about $90 billion, about 75 percent of their depositors’ foreign currency funds, into the Central Bank. By that point, the Central Bank had already lost about $60 billion of those deposits, nearly two-thirds of what it had received. Unsurprisingly, $60 billion corresponds almost exactly to the profits paid out to bankers from these transactions.
UN Secretary-General António Guterres, French President Emmanuel Macron, and the World Bank all described these practices as a “Ponzi scheme.” The label is apt: such schemes typically use funds from new investors or depositors to pay inflated returns to earlier participants, without generating genuine profits. This structure makes them inherently fraudulent and inevitably destined to collapse.
Later, a report by Daraj Media revealed that Salameh and former Prime Minister, billionaire Najib Mikati, were covert shareholders in Bank Audi, Lebanon’s largest bank. This meant they directly profited from Salameh’s financial engineering schemes, in a violation of Lebanon’s Code of Money and Credit, which prohibits the governor from holding shares in banks to avoid conflicts of interest.
Outright theft
While financial engineering schemes were presented as serving public interest, other financial crimes in Lebanon were outright acts of illicit appropriation, later uncovered through Lebanese and European judicial investigations. One of the most prominent examples is the case of Forry Associates, an offshore company registered under the name of Riad Salameh’s brother, Raja.
Between 2002 and 2015, Forry Associates allegedly received nearly $330 million from the Central Bank, supposedly as compensation for intermediating the sale of financial assets to commercial banks. Judicial investigations revealed that Forry Associates was actually a shell company: it never provided any real services or conducted any verified business activity. In fact, there was no legitimate reason to use an intermediary to market and sell those bonds, as the Central Bank normally trades financial products directly with commercial banks.
Another case was that of Optimum Invest, a brokerage firm engaged in suspicious transactions with the Central Bank between 2015 and 2018. The mechanism was simple: The Central Bank loaned Optimum Invest funds to purchase treasury bonds from it, then bought back those same bonds at a higher price, inflating the bond value and realizing “profit” for the Central Bank on paper. Some of the generated funds related to these transactions were deposited in an account at the Central Bank, from which disbursements were allegedly made.
Perhaps most alarmingly, such financial abuses did not end with the onset of the collapse: they continued
Forty five such transactions were carried out, generating some $8 billion. To date, no thorough investigation has been carried out, even after Salameh’s arrest in September 2024. The investigation was limited to a small portion of these gains, amounting to no more than $42 million of the funds that were transferred to Riad Salameh’s personal account.
Perhaps most alarmingly, such financial abuses did not end with the onset of the collapse: they continued, shielding the elites against the ramifications of the crisis. In early 2020, while banks were denying ordinary depositors transfers, and withdrawals were restricted to a ceiling of approximately $400 per month per account, the Central Bank extended loans worth $8 billion to 15 Lebanese banks, using what remained of its reserves. When Lebanon’s Public Prosecutor attempted to investigate whether these funds were legitimately used, the banks refused to cooperate, citing banking secrecy laws.
Forensic audits: The first step toward accountability
In 2020, Lebanon’s cabinet decided to subject the Central Bank to a comprehensive forensic audit, aiming to trace the origins of its mounting losses and uncover any waste, mismanagement, or illicit activity. The move came under intense public pressure after it became evident that the Central Bank was responsible for wiping out depositors’ funds. That same year, Parliament passed a law forcing the Central Bank to provide the necessary information for the audit.
Despite the cabinet and the Parliament’s decisions, the Central Bank—still under Salameh’s leadership—refused to fully cooperate with Alvarez & Marsal, the firm commissioned to carry out the audit. The Central Bank provided only 42 percent of the requested data, withholding crucial details such as the identities of beneficiaries of transfers. As a result, the firm was unable to publish its findings until 2023. Even then, it could only issue a “preliminary audit” report.
Nevertheless, the preliminary report offered important insights into the Central Bank’s practices. It quantified the amount of liquidity that the Central Bank wasted from the depositors’ funds. It also exposed governance and oversight failures, the link between the Central Bank’s losses and the “financial engineering” schemes, and questionable payments to companies such as Forry Associates and Optimum Invest. Despite its shortcomings, the audit flagged multiple indicators that warranted deeper investigation.
Today, Lebanese authorities are better positioned to move forward, as many of the earlier obstacles have been lifted
Building on this preliminary report requires a comprehensive audit of the Central Bank’s accounts. Today, Lebanese authorities are better positioned to move forward, as many of the earlier obstacles have been lifted: Riad Salameh left office in 2023, and Parliament passed a law in April 2025 lifting banking secrecy for auditing purposes. A full forensic audit could uncover highly significant details, such as how profits from financial engineering were distributed before the collapse; the exact mechanisms through which these profits were extracted at the expense of depositors; and the ultimate beneficiaries of questionable contracts. Most importantly, a detailed audit could uncover other, previously unknown, fraudulent schemes.
Upon assuming power, Prime Minister Nawaf Salam reaffirmed the government’s commitment to expanding the forensic audit to cover ministries, public institutions, and government agencies, including the Central Bank. Meanwhile, current Central Bank Governor Karim Souaid pledged to grant Alvarez & Marsal full access to the information required to complete its work and produce a more detailed report. Moving forward with the forensic audit therefore depends solely on honoring commitments already made to the Lebanese public.
In parallel, since 2022, Lebanon has also been bound under a staff-level agreement with the International Monetary Fund to conduct accounting audits of the 14 largest banks. These audits aim to provide an accurate picture of each bank’s financial position, classify them according to their ability to continue operating, and crucially, reveal the extent of each bank’s exposure to the Central Bank’s irregular operations. The banking resolution law, as we will explain below, will regulate this process.
Emerging opportunities
During 2025, several pieces of legislation were put forward, offering potential entry points for advancing accountability and oversight.
The first is Law No. 23 of 2025 on Reforming and Reorganizing the State of the Banks in Lebanon (known as the Banking Resolution Law), passed on July 31, 2025, establishing the framework for restructuring the banking sector. The law grants the Banking Control Commission (BCC) the authority to audit the balance sheets of individual banks, and assess their financial conditions. The Commission would review all banking operations carried out over the past decade, benefiting from the recent lifting of banking secrecy, which grants it retroactive investigative powers extending up to 10 years.
Based on the results of these audits, the BCC will be able to recommend measures such as dismissing a bank’s management, appointing a temporary administrator, and prosecuting former executives if evidence of serious misconduct emerges. The law also empowers the BCC to propose recovering past profits realized by major shareholders and board members. In addition, it can also recommend bringing in new investors to recapitalize banks or require existing shareholders to inject fresh liquidity to maintain ownership. If these conditions are not met, liquidation remains a legal option.
Final decisions on the recommendations of the BCC rest with the Higher Banking Commission (HBC), chaired by the Central Bank governor. It should be noted that the government proposed amendments to the Banking Resolution Law on October 23, 2025, aimed at ensuring the enforceability of HBC’s decisions by limiting banks’ ability to obstruct them through repeated legal appeals. These amendments are yet to pass.
In parallel, the government approved a draft of the Law on Financial Regularization and Deposit Recovery (known as the Gap Law), intended to establish mechanisms for resolving the deposit crisis. During the coming weeks, Parliament is expected to examine this draft law, which is supposed to set clear criteria for the phased repayment of deposits, after determining the burden to be borne by commercial banks, the Central Bank, and the Lebanese state. It will also establish standards for recovering a portion of the funds that banks transferred abroad during the crisis for the benefit of influential clients, as well as the excessive profits distributed to shareholders.
Taken together, these legislative initiatives offer opportunities to launch a genuine process of accountability, particularly if the BCC fully exercises the new powers granted under the Banking Resolution Law. However, achieving these goals will also require the government and the Central Bank to honor their commitments; namely, completing the forensic audit and carrying out accounting audits of the 14 largest banks. Without these investigations, it will be nearly impossible to form a comprehensive picture of the sources of the sector’s losses or to devise equitable solutions on that basis.
Ali Noureddeen is a Senior Inclusive Economies Associate at TIMEP, focusing on issues related to fiscal policies, socioeconomic inequalities, and social protection in Lebanon.