Lebanese parliament approves law lifting banking secrecy

Reform is a key request by International Monetary Fund to unlock $3 billion package

Protesters campaign for bank depositors' rights in Beirut. Millions of Lebanese have been locked out of their savings amid a financial crisis. EPA

The Lebanese parliament has approved a law aimed at removing banking secrecy in the country, a key reform demanded by the International Monetary Fund for a $3 billion package to be delivered.

A majority of 87 MPs voted for the law, while 13 were against in the 128-member legislature. There is a 10-year retroactive clause in the law, meaning that it will apply to all accounts dating back to 2015.

Lebanese rights group Legal Agenda said the law would give authorities access to information including customer names and deposit details, and the ability to look into possible suspicious activity.

In late 2019, as Lebanon's economic collapse was becoming apparent, bankers were accused of helping powerful people transfer money overseas when ordinary citizens were locked out of their deposits. In theory, the 10-year retroactive clause means any suspicious activity during the financial collapse could be investigated.

The law had already been approved by the new Lebanese government, which has sought to impress on the international community its desire to reform the country's much-maligned financial sector.

Prime Minister Nawaf Salam said the passing of the bill "constitutes a necessary step toward the desired financial reform our government has pledged to achieve".

He said the law "opens a new chapter in the fight" against tax evasion, money laundering and financial corruption.

For decades Lebanon had been known for its banking secrecy, which prevented banks from disclosing any information about their clients or their accounts to anyone. But while that secrecy was once seen as a tool to help the economy, in recent times it has been viewed as a cover for corrupt practices.

Former central bank governor Riad Salameh has been detained over charges of embezzling public funds. Nady Salameh, the son of Riad, is among close relatives of top officials accused of transferring money abroad and evading the withdrawal restrictions faced by most Lebanese.

The IMF deal entered into a staff-level agreement with the state in April 2022, but Lebanon was accused of dragging its feet in introducing the reforms required.

Thursday marks parliament's third attempt to amend banking secrecy regulations, with previous efforts deemed insufficient by the IMF.

Economic reform

Lebanon's new leaders insist they are committed to the IMF programme but have sought to renegotiate it.

International donors have also made economic reform, which would include lifting banking secrecy, a key requirement for Lebanon to access much-needed aid to rebuild the country after it suffered widespread devastation during Israel's war with Hezbollah last year.

Lebanon's economy, already struggling at the time, experienced a severe downturn in 2019 that has been blamed on decades of financial mismanagement and corruption by the country's ruling classes.

The crisis has culminated in the depreciation of the local currency, falling by more than 95 per cent against the US dollar. It has also seen depositors locked out of their savings.