Lebanon resumes a long-awaited forensic audit to shed light on the financial disaster that plunged the country into crippling economic collapse.
Lebanese President Michel Aoun signed a decree on September 1, 2021, to allocate 4.9 billion Lebanese pounds (2.7 million euros, $ 3.2 million) to the global professional services firm Alvarez & Marsal (A&M ) in order to resume an audit of the central bank of Lebanon (Banque du Liban, BDL).
A&M ended the forensic audit in November 2020 due to obstruction and lack of cooperation from BDL, the latter hiding behind a bank secrecy law. The Lebanese parliament did not lift the law on BDL until December 2020, following pressure from President Aoun.
In August 2021, the Ministry of Finance (MOF) paid A&M severance pay of $ 150,000, according to local newspaper The Daily Star.
Lebanon’s future at stake
The country plunged into a financial crisis after the collapse of a Ponzi scheme, in which new money was constantly borrowed on the promise of high interest payments.
The collapse forced private banks to lock depositors’ dollar accounts. As a result, the Lebanese pound has lost over 90% of its value, ultimately leaving more than half of the population in poverty.
To date, no one has been held responsible for this economic collapse. The forensic audit will help clarify what exactly happened to the Lebanese economy and what needs to be prosecuted.
Unlike a financial audit, a forensic audit is a much more in-depth analysis that aims to uncover illegal transactions, fraud, forgery, embezzlement of public funds, and out-of-country transfers. A&M is expected to provide a preliminary report to the Finance Department in 12 weeks, according to the Daily Star.
BDL’s forensic audit is vital for the future of Lebanon. As the treasurer of the Lebanese Association for Transparency, Jamal Bleik, told DW, this allows the country to assess the economic and financial damage. It has a critical role to play in uncovering systematic corruption and in holding individuals accountable for mismanagement and wrongdoing.
Finally, it is functional as a precondition for accessing international aid and regaining the confidence of private investors.
“The government believes that the forensic audit can give Lebanon access to help from international institutions such as the World Bank and the International Monetary Fund,” he said.
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Flaws undermine the audit
However, the audit faces several obstacles that can threaten its progress.
Tax lawyer Karim Daher told DW that lawmakers cleared two loopholes when bank secrecy was lifted. First, A&M will have little time to publish its preliminary report, as banking secrecy has only been suspended for a year. Second, the auditor’s mission prescribes focusing only on the central bank, so that A&M will not have the opportunity to audit other public institutions that may be relevant in this context.
Nonetheless, “the auditor might discover that politicians may have benefited from loans, subsidized loans to which they were not entitled, tax evasion, donations and other financial crimes, including conflicts of interest.” , said Daher.
Beirut-based economist Sami Zoughaib told DW that BDL is one of the most opaque central banks in the world. “There is evidence of accounting manipulation. A&M will find it difficult to complete its audit in such a short time,” he said.
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What will happen next?
Bleik also explained that A&M was to provide its findings to the National Anti-Corruption Commission, an institutional body still awaiting formation, and the Special Investigation Commission, which is chaired by BDL Governor Riad Salameh. “In my opinion, there is a conflict of interest there,” he said.
“If there are policy implications in the forensic audit report, the government will not disclose it publicly. Yet the forensic audit is supported by the international community, which is trying to fight corruption and to help the country financially in case there is clear evidence for the reforms, ”insisted Al Okaily.
Although political parties have not spoken publicly against the forensic audit, they have tried to make arguments against it. Zoughaib explained that most of them tried to undermine the forensic audit. Governor Salameh was forced to change his negative stance on the audit due to public pressure.
“Although he is the subject of an investigation in Switzerland, Salameh is very powerful in Lebanon. He controls the last remaining assets of the country. He will be aware of any mismanagement of the political class and the leaders,” he said. declared Zoughaib.
“If he separates, the whole house of cards will collapse with him,” he concluded.