Former governor of Lebanon’s Central Bank, Riad Salameh, was arrested and awaits trial on embezzlement charges, the Wall Street Journal reported on Sunday.
Salameh is considered a central figure who ushered in economic instability in Lebanon, which eventually led to a power vacuum that allowed the Iranian-backed terrorist group Hezbollah to make gains in Lebanese politics and society.
Lebanon has lurched from crisis to crisis before Hezbollah began firing rockets and drones at Israel on October 8, after Hamas’s October 7 attack on southern Israel. Lebanon was in financial distress in 2022, and it suffered greatly due to the Beirut Port explosion in 2022.
France has demanded Salameh, a dual Lebanese-French citizen, extradition to face money laundering and tax fraud charges, the Wall Street Journal wrote.
Additionally, he is sanctioned by the US for allegedly using funds from Lebanon’s central bank to buy luxury apartments for his son and former mistress.
The Wall Street Journal noted that the case could have sprawling impacts on Lebanon. If Salameh were to be indicted, it would show that Lebanon is serious about cracking down on corruption in the political system and could ease international bailout and aid in Lebanon’s post-war scenario.
Former US Assistant Secretary of State for Near Eastern Affairs David Schenker referred to Salameh, saying, “He knows where the bodies are buried.”
“The powers that be, the political elites, would rather just put this guy on ice, isolate him, remove any possibility that he might turn state’s evidence and implicate countless members of the Lebanese elites,” the Wall Street Journal quoted Schenker.
On September 3, Salameh was summoned for questioning at Beirut’s Ministry of Justice and, during the interrogation, was handcuffed and detained on charges of embezzling funds from the central bank, the Wall Street Journal noted.
Prosecutors charged Salameh with illegally taking $40 million from the bank, and in a separate case, European prosecutors and the US government accused him of stealing $330 million, the Wall Street Journal said.
Salameh denied the charges against him. He previously served as portfolio manager for Lebanon’s former prime minister Rafiq Hariri, who was assassinated in 2005.
The Wall Street Journal reported that the central bank, under Salameh’s leadership, borrowed heavily and offered high borrowing rates for dollar deposits. Lebanon faced a dollar shortage when millions of expats left during the Arab Spring.
The bank allowed people to easily convert the Lebanese pound to the dollar, but it lacked the dollars to cover all accounts, with the Wall Street Journal citing economists as calling this setup a “pyramid scheme.” The 2019 crisis triggered a bank run followed by protests demanding a political overhaul, which Hezbollah and other Lebanese political elites refused.
The Lebanese people have largely suffered from the 2019 crisis, with many leaving Lebanon and resent Salameh for causing the crisis. Lebanese prosecutors and Western officials believe that Salameh leveraged his role at the central bank to enrich himself in the process, including funneling $330 million to a shell company owned by his brother in the British Virgin Islands through an arrangement that gave the company a commission on years of central bank transactions, the Wall Street Journal reported, citing the US Treasury.
Seth J. Frantzman contributed to this report.
