A second brokerage firm that had close dealing with Lebanon’s central bank has been put under the microscope for what auditors have described as “extravagant” irregularities, “breach of trust”, “conflicts of interest” and “irregular transactions”.
The questions raised about Optimum Invest SAL, a Lebanese brokerage firm established in 2004 with which the central bank signed a non-exclusive contract, are detailed in two reports, a forensic audit of the bank released last monthand a 2015 audit, whose findings are disclosed here for the first time.
It follows revelations about Forry Associates, a brokerage firm owned by the brother of former central bank governor Riad Salameh. The firm is suspected of being a shell company created with the sole intention of siphoning off more than $330 million from the bank.
Investigators found that the intermediary levied a 0.38 per cent commission each time a commercial bank bought financial instruments from the central bank, without performing actual services in exchange.
Riad Salameh is the subject of two arrest warrants and an Interpol red notice. The US, UK and Canada have also imposed sanctions on him in connection with the accusations against him, which he and his brother, Raja Salameh, have repeatedly denied.
According to the two audits:
Optimum engaged in transactions flagged as "highly irregular" with the central bank, seemingly continuing the Forry "commission scheme“, resulting in an additional $111 million in "illegitimate commissions”.
Optimum helped to "manipulate" the financial statements of Lebanese commercial banks to conceal their losses, while generating generous fees for itself.
Optimum significantly "overcharged" its clients, mostly Lebanese banks. Although the report does not specify where the extra funds generated from these inflated financial instruments went, it identifies several "conflicts of interest" involving Optimum's management, which are well-connected within the financial sector and certain Lebanese bankers.
Optimum did not respond to inquiries regarding these findings.
A Lebanese senior judicial source told The National that they were actively looking into the file to open a case against the broker.
For decades, Lebanon maintained the facade of having a robust banking sector, with its foundations rarely questioned. The abrupt and devastating economic crisis that began in late 2019, marked by financial losses exceeding $70 billion, a collapsed local currency and largely insolvent banks, caught many off guard.
But the mounting pressure for increased scrutiny of irregularities within the Lebanese financial sector is gradually uncovering pieces of the puzzle behind what the World Bank has described as one of the worst financial crises in more than 150 years.
Antoine Kassis. Photo: Optimum Invest
’Extravagant‘ misconduct
Optimum's 2015 audit was conducted by the Capital Markets Authority's (CMA) financial control unit, an independent regulatory body that focuses on financial market practices in Lebanon.
The report has come to light after claims of strong resistance within the CMA to release it to the relevant authorities.
"The audit was repeatedly sent to the CMA but was consistently replaced by shorter, sanitised versions lacking incriminating conclusions," a source told The National.
The 260-page document, obtained by The National, resulted from document reviews, on-site audits and meetings with key stakeholders, including Optimum chairman Antoine Salame, a distant relative of Riad Salameh, and head of trading Antoine Kassis.
The report, which examined trading activity between banks, mainly Lebanese and Optimum, revealed a series of "extravagant" examples of misconduct, including irregularities in swaps, where Optimum acted as an intermediary between banks.
Auditors suspected that, if this is the case, the swaps – agreements in which one party exchanges the value of an asset with another – were realised at "fictitious prices" to conceal banks' losses.
In essence, these transactions allegedly helped Lebanese banks to "cook the books" by reporting trades at higher prices than their actual market value, all the while generating generous fees for Optimum.
Auditors noted that neither Mr Salame nor Mr Kassis had shown "any remorse" for their participation in these transactions, which had "major repercussions on the industry at large”.
The auditors also claim that Optimum "double-charged clients' fees" by adding spreads beyond their initial agreements.
This practice, known as a double-dipping scam, involved Optimum selling overpriced financial instruments to Lebanese banks.
One of the aggrieved clients is the Caerus Fund, managed by Mr Salame and which was described as another form of "extravagant breach of trust”.
A lingering question is how bankers became involved in transactions detrimental to their institutions, and what became of the profits generated from these actions.
The auditors uncovered "conflicts of interest" as they found that Mr Salame had close business partnerships with people who worked in the securities business.
They included several Lebanese bankers, a senior director at the central bank and secretary of the CMA board, Raja Abou Asli.
Lebanon's Central Bank Governor, Riad Salameh, greets employees on his last working day as the head of the Central Bank in Beirut, Lebanon, 31 July 2023. EPA
Mr Abou Asli did not answer The National's inquiries regarding concerns of "conflicts of interest", which were raised by auditors regarding a limited liability company, New Edge Properties, registered in Florida, which the central bank director owns in partnership with Mr Salame.
Mr Salame declined to comment to The National.
"Such business partnerships put the participants in a conflict of interest, vis-a-vis their actual responsibilities with the firms, which they work for," the auditors said.
The auditors recommended that refunds were issued to all clients.
Neither compensation nor any form of sanctions against Optimum have been enforced, sources said.
'Continuation of the commission scheme’
However, the tableau remains unfinished. The CMA audit stopped in 2015 and did not scrutinise the central bank's trading activity with Optimum.
This is despite the fact the bank is Optimum's biggest client, consisting of 98 per cent of its asset under management. The CMA audit therefore solely focused on the remaining 2 per cent, primarily involving transactions with Lebanese banks.
Why was the central bank not included in the auditor's investigation?
The CMA did not reply to a request for comment, but the fact Lebanon's financial watchdog was led at the time by Riad Salameh, who left his position as governor of the central bank at the end of July, might offer an answer.
The central bank's forensic audit, which covers the period from 2015 to early 2020, provides an insight into some of the transactions with the bank that were flagged as "irregular".
International auditors Alvarez & Marsal discovered that bank sold financial instruments to Optimum only to repurchase them at higher prices immediately.
As both the central bank and Optimum did not reply to our requests for comment, the economic rationale behind these transactions remains uncertain.
The additional premium was then directed to a commission account – the same account allegedly used by Forry to funnel public funds into European property tied to Riad Salameh and his relatives.
“This appears to be a continuation of the commission scheme under investigation by Lebanese and international prosecuting authorities,” the auditors wrote.
The ultimate beneficiaries of these commissions are unknown due to the absence of comprehensive data provided by the central bank.
Optimum's website shows it is currently operating and was acquired in June 2020 by LIBANK SAL (Levant Investment Bank SAL). It says it is committed to "a high sense of ethics in dealing with all stakeholders" and is dedicated to "laws and regulations".
Mr Kassis, who did not respond to our requests for comment, is still listed as a member of the board of directors.
This is despite the recommendation from the 2015 audit, which "based on the gravity of their misconduct", suggested sanctions including industry bans for the chairman and the head of trading, emphasising that they are "are neither fit nor proper to act in their current capacity".
Tank warfare
Lt Gen Erik Petersen, deputy chief of programs, US Army, has argued it took a “three decade holiday” on modernising tanks.
“There clearly remains a significant armoured heavy ground manoeuvre threat in this world and maintaining a world class armoured force is absolutely vital,” the general said in London last week.
“We are developing next generation capabilities to compete with and deter adversaries to prevent opportunism or miscalculation, and, if necessary, defeat any foe decisively.”
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
Classification of skills
A worker is categorised as skilled by the MOHRE based on nine levels given in the International Standard Classification of Occupations (ISCO) issued by the International Labour Organisation.
A skilled worker would be someone at a professional level (levels 1 – 5) which includes managers, professionals, technicians and associate professionals, clerical support workers, and service and sales workers.
The worker must also have an attested educational certificate higher than secondary or an equivalent certification, and earn a monthly salary of at least Dh4,000.
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
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Starring: Winona Ryder, Michael Keaton, Jenny Ortega
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Rating: 3/5
How to register as a donor
1) Organ donors can register on the Hayat app, run by the Ministry of Health and Prevention
2) There are about 11,000 patients in the country in need of organ transplants
3) People must be over 21. Emiratis and residents can register.
4) The campaign uses the hashtag #donate_hope
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Dir: John Lucas and Scott Moore
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Sharrie Williams
The American singer is hugely respected in blues circles due to her passionate vocals and songwriting. Born and raised in Michigan, Williams began recording and touring as a teenage gospel singer. Her career took off with the blues band The Wiseguys. Such was the acclaim of their live shows that they toured throughout Europe and in Africa. As a solo artist, Williams has also collaborated with the likes of the late Dizzy Gillespie, Van Morrison and Mavis Staples. Lin Rountree
An accomplished smooth jazz artist who blends his chilled approach with R‘n’B. Trained at the Duke Ellington School of the Arts in Washington, DC, Rountree formed his own band in 2004. He has also recorded with the likes of Kem, Dwele and Conya Doss. He comes to Dubai on the back of his new single Pass The Groove, from his forthcoming 2018 album Stronger Still, which may follow his five previous solo albums in cracking the top 10 of the US jazz charts. Anita Williams
Dubai-based singer Anita Williams will open the night with a set of covers and swing, jazz and blues standards that made her an in-demand singer across the emirate. The Irish singer has been performing in Dubai since 2008 at venues such as MusicHall and Voda Bar. Her Jazz Garden appearance is career highlight as she will use the event to perform the original song Big Blue Eyes, the single from her debut solo album, due for release soon.
- At 9.16pm, three suicide attackers killed one person outside the Atade de France during a foootball match between France and Germany - At 9.25pm, three attackers opened fire on restaurants and cafes over 20 minutes, killing 39 people - Shortly after 9.40pm, three other attackers launched a three-hour raid on the Bataclan, in which 1,500 people had gathered to watch a rock concert. In total, 90 people were killed - Salah Abdeslam, the only survivor of the terrorists, did not directly participate in the attacks, thought to be due to a technical glitch in his suicide vest - He fled to Belgium and was involved in attacks on Brussels in March 2016. He is serving a life sentence in France
Mazen Abukhater, principal and actuary at global consultancy Mercer, Middle East, says the company’s Melbourne Mercer Global Pension Index - which benchmarks 34 pension schemes across the globe to assess their adequacy, sustainability and integrity - included Saudi Arabia for the first time this year to offer a glimpse into the region.
The index highlighted fundamental issues for all 34 countries, such as a rapid ageing population and a low growth / low interest environment putting pressure on expected returns. It also highlighted the increasing popularity around the world of defined contribution schemes.
“Average life expectancy has been increasing by about three years every 10 years. Someone born in 1947 is expected to live until 85 whereas someone born in 2007 is expected to live to 103,” Mr Abukhater told the Mena Pensions Conference.
“Are our systems equipped to handle these kind of life expectancies in the future? If so many people retire at 60, they are going to be in retirement for 43 years – so we need to adapt our retirement age to our changing life expectancy.”
Saudi Arabia came in the middle of Mercer’s ranking with a score of 58.9. The report said the country's index could be raised by improving the minimum level of support for the poorest aged individuals and increasing the labour force participation rate at older ages as life expectancies rise.
Mr Abukhater said the challenges of an ageing population, increased life expectancy and some individuals relying solely on their government for financial support in their retirement years will put the system under strain.
“To relieve that pressure, governments need to consider whether it is time to switch to a defined contribution scheme so that individuals can supplement their own future with the help of government support,” he said.
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