Skip to main content

Lebanon: $8B Fraud, Round-Tripping, Money Laundering

· 3 min read
John Kowala
AML Analyst

Newly leaked financial disclosures have raised red flags regarding suspicious transactions between Lebanon's central bank, Banque du Liban (BDL), and Lebanese broker, Optimum Invest SA. The transactions, totaling $8 billion, have reportedly been uncovered in a confidential audit conducted by international forensic audit firm Kroll.

Round-Tripping Transactions: A Type of Financial Fraud​

The relationship between BDL and Optimum Invest SA appears to involve round-tripping transactions, a type of fraudulent practice that generates false profits by booking all potential future interest payments as current revenue without creating any economic value.

The findings have left many financial experts denouncing the transactions as a "fraud scheme," raising questions and emphasizing the need for increased transparency and accountability in the Lebanese financial sector.

Allegations of Money Laundering and Sham Transactions​

Two of the transactions have previously been flagged in a 2015 Alvarez & Marsal audit due to suspected money laundering activities.

Former Finance Ministry adviser, Henri Chaoul, stated:

"This type of transaction would qualify as a sham transaction by any international standards."

Massive Scale of the Alleged Fraud Scheme​

The magnitude of the alleged $8 billion scheme, representing about 15% of Lebanon's gross domestic product, is truly astonishing, especially since no alarms have been raised.

A western diplomat familiar with the situation finds it concerning:

"The lack of any alarm being raised is truly astonishing. This suggests a systemic pattern of fraud designed to offset losses generated by reckless monetary policies, with a scale significant enough to potentially destabilize an entire country."

Ongoing Inquiry and Future Developments​

  • Judge Ghada Aoun is currently investigating these allegations of falsified financial statements involving Optimum.
  • The BDL source confirmed that the central bank is looking into the claims.
  • Further developments and updates on the investigation are expected.

Previous Praise for BDL and Formers Governor Riad Salameh​

The banking sector in Lebanon, previously maintaining an image of resilience, collapsed in 2019. This financial downturn left many depositors locked out of their savings, plunging the value of the local currency, and causing widespread poverty.

Despite this economic downturn, many were caught off guard by the collapse. The BDL's former governor, Riad Salameh, had once been praised for his role in keeping the country's economy strong amidst war and instability.

Deloitte and Ernst & Young: Failure to Flag Suspicious Transactions​

The failure of auditing firms Deloitte and Ernst & Young to flag these transactions, despite having provided sign-offs on the BDL financial statements for decades, adds to the growing calls for transparency and accountability within the Lebanese financial sector. Both firms have not responded to requests for comment.

Further investigation into these matters is essential to uncover the truth behind these transactions and restore trust in the Lebanese financial sector.