How feasible is the recovery of stolen Lebanese assets?

A leap of faith

Photo by Greg Demarque | Executive

The Lebanese uprising that burst into the streets across the country on October 17, 2019 was a focal point for long held frustrations over a poor governance system and widely perceived endemic corruption. The trigger for the protests was a series of proposed taxes that the previous Lebanese cabinet had agreed on, as part of its austerity push amid a declared state of economic emergency. Those that took to the streets saw these measures as punching down on a populace already suffering economically, and instead directed their anger toward a political class that had, since the end of the civil war, been presiding over Lebanon’s ever-expanding fiscal deficit and public debt. Among the demands that emerged from the streets over months of protests was a call to retrieve stolen public funds and freeze the assets of Lebanese politicians located abroad. Recovering these assets, however, is not a straightforward process.

The full scale of illicit proceeds from corrupt practices is challenging to calculate. The United Nations Office on Drugs and Crime (UNODC) estimates that the amount of money laundered through corrupt or criminal activities in the world ranges from 2 to 5 percent of global GDP, calculated as between $800 billion to $2 trillion per year at the time of estimation. UNODC notes that, while the margin is huge, even at the lower scale it “underlines the seriousness of the problem.”

Those engaged in corrupt activities have various strategies to conceal the origins of their illicitly gained assets. They can illegally—or legally—transform them into several forms, including but not limited to: hard or electronic currency, movable and immovable property, shareholdings, and offshore companies. These asset transformations facilitate their circulation across multiple jurisdictions, while using the names of different owners to further camouflage their real point of origin. This makes it increasingly challenging for law enforcement agencies to track, trace, and legally confiscate them. Tracing and identifying these assets is time consuming as it requires lengthy and costly legal investigations, which, in turn, require the relevant jurisdictions to have open access to public registers such as court records, company and land registers, customs records, and bank accounts. These investigations need to identify the causal link between the crime(s) and the offender(s)—and lead to prosecution and the recovery of the assets.

Effective cross-border judicial assistance requires transparent and effective communication; this is complicated by the differences, in many cases complex, between legal processes and terminologies across multiple jurisdictions. The efficiency of the assert recovery process is also hindered by the lack of qualified and experienced judges in state authorities, as well as the absence of focal point agencies and local and international assistance networks. To overcome these challenges, strong national legal and institutional frameworks compliant with the international measures and best practices—such as the United Nations Convention Against Corruption and United Nations Convention Against Transnational Organised Crimes—are indispensable.

Unfortunately, the legal anti-corruption and anti-money laundering tools in Lebanon pose several serious obstacles to the asset recovery process. A 1956 law on banking secrecy law prohibits national banks from revealing any information concerning banks’ books, transactions, or correspondence of depositors—including politicians and their relatives. Sitting unvoted on in Parliament is a now almost three-year-old draft law to amend Law 154 (1999) on illicit enrichment, yet neither the law or the awaited amendment require government officials and politicians to publicly disclose their assets in all their forms located in or outside Lebanon. Two laws designed to control, prevent, and criminalize acts of corruption—Law 44 (2015) on anti-money laundering and terrorism financing, and Law 55 (2016) on the exchange of information for tax purposes—were also not effectively implemented. Law 44 states that the Special Investigation Commission (SIC) of Banque du Liban (BDL), Lebanon’s central bank, is the focal point within the authority to seize suspicious bank accounts and to confiscate the movable and immovable assets that are proven to be the results of money laundering activities. The law is silent, however, regarding any further measures or practical procedures regulating the asset recovery process—from the pre-investigation and investigation to the judicial and the return phases. Law 28 (2017) on access to information, which took almost a decade to be passed by Parliament, has faced endless implementation challenges. In particular, Law 28 is hampered by its co-dependence on a National Anti-Corruption Commission (NACC) that is yet to be established. Besides the slow passage of necessary legal tools to combat corrupt practices, as well as the obsolescence and the incompliance of Lebanese laws with the international measures the country has ratified, there is also an entrenched culture of secrecy that is wearing down every attempt for reform and compounding the obstacles brought on by the lack of a clear, full-fledged, and unified asset recovery legal framework.

During a seminar that took place in Beirut on January 26, 2020, on fighting corruption, tax evasion, and asset recovery, Charles Bratz, a French judge specialized in anti-corruption and asset recovery, stated that the independence of the judiciary is a prerequisite for a successful and efficient asset recovery process. The Lebanese Judges Association did call, on October 18, 2019, for the temporary seizure of the accounts of all politicians, senior officials, judges, and public sector workers, in addition to their family members, whose deposits exceed LL750 million ($500,000 at the official rate). Yet this never materialized, and, in the now over five months since the protests first broke out, there have been no indictments or investigations by our judiciary into corrupt practices. Serious questions remain over whether the Lebanese judiciary, hampered by a severely politicized judicial system lacking in basic independence, would be able to prosecute corrupt politicians and succeed in recovering stolen funds.

One further—and crucial—aspect to consider before originating an asset recovery case is cost. These kinds of investigations can often be prohibitively expensive, as they involve all kinds of anticipated or ad-hoc costs—such as employing additional experts, translating large number of documents, and managing and maintaining the frozen assets—that Lebanon currently cannot handle, given the economic, financial, monetary, and now coronavirus crises that are unfolding in tandem.

Given the above, there is a serious question to be answered: Is recovering stolen assets from abroad the entry point for Lebanon or should efforts be focused on bridging the legal gaps in ways that would prevent politicians from looting and laundering public funds in the future? In other words we must ask ourselves moving forward if the benefits, i.e. the amount of recovered assets, would outweigh the costs, i.e. the money spent throughout the process of asset recovery. 

The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the position of the Lebanese Transparency Association or the editorial views of Executive Magazine.

Riwa Zoghaib

Riwa Zoghaib is a governance and anti-corruption expert, currently employed as a project coordinator/researcher at the Lebanese Transparency Association (LTA).