available languages: english December 8, 2020

Sabine El Hayek, Legal Research Officer at DRI Lebanon follows up on her first article on the forensic audit of the Central Bank of Lebanon after the official withdrawal of the consultancy firm Alvarez & Marsal (A&M).

Given the urgency of the situation, President Aoun used his constitutional powers according to Article 53 (§10) and addressed a letter to the Parliament on 24 November.

The president’s letter to parliament emphasised the importance of the forensic audit for curbing corruption. In accordance with Article 145 of the parliament’s rules of procedure, MPs convened on 27 November to discuss the president’s request and decide on the way forward. Instead of enacting a law, the MPs issued a decision on the same day, stressing the need to conduct a forensic audit on the Central Bank’s accounts, as well as those of ministries, independent entities, councils, specials funds, and public institutions, without any hindrance or attempt to invoke banking secrecy.

Decisions, unlike laws, are non-binding and only used for limited purposes, none of which apply in this case. Wissam Lahham, an expert in constitutional law, pointed out that the parliament has no right to vote on decisions other than in matters concerning its internal affairs. These include three types of decisions: those related to parliamentary rule of procedure, those in which the General Assembly decides whether to return a draft law to parliamentary committees, and those establishing parliamentary investigation committees.

Even though a new law is not necessary to lift banking secrecy on public funds, the MPs missed a rare opportunity for reform. Curiously, the Speaker of the Parliament opened, right after this decision, a legislative session during which MPs approved a law granting the families of the victims of the Beirut port explosion important social protection privileges, but a legal commitment to the forensic audit was, yet again, postponed.

In a recent interview on Al-Hadath TV, the Central Bank’s governor, Riad Salameh, confirmed that the Central Bank will comply with a memo sent on 1 December by the Finance Minister to hand over the state’s accounts. The Finance Ministry would then share the information with the auditing firm. However, Salameh warned that banking secrecy will continue to apply as long as Article 151 of the Code of Money and Credit is not duly amended, no matter who leads the forensic audit.

The question remains whether A&M is still interested in resuming the task after its official withdrawal, or if the caretaker government is entitled to contract a new company. Since the decision to conduct a forensic audit was taken in March 2020, all the effects resulting from this decision are considered a continuation of the current government’s work, all the more so given the urgency of the situation.

DRI Lebanon recommends:

  • Adopting a law lifting banking secrecy, even though it is not necessary when dealing with public funds, to carry out a forensic audit and restore Lebanon’s credibility among donors

  • Amending the law on “Fighting Money Laundering and Terrorist Financing” No. 44/2015 to prevent the Central Bank’s governor from chairing the Central Bank’s Special Investigation Commission, which poses a conflict of interest and undermines the forensic audit

  • Enhancing the role of the Government Commissioner at the Central Bank to conduct the forensic audit

  • If a new foreign company is to be appointed, it should be specialised in forensic auditing, be less expensive than A&M, and contractual loopholes should be taken into consideration before drafting the contract.