Replacing Switzerland? Why Lebanon isn't keeping its banking secrecy a secret

Published April 1st, 2015 - 08:23 GMT

 Lebanon will not abandon its banking secrecy law but will continue to cooperate with the United States and other nations in the exchange of tax information and the fight against money laundering, leading bankers said Thursday.

“Lebanon has no intention to abandon the banking secrecy law, although Switzerland and other countries may remove this law eventually,” Francois Bassil, the president of the Association of Banksin Lebanon, told The Daily Star.

Lebanon adopted the banking secrecy law in 1956 in a bid to attract Lebanese and foreign deposits.

According to the legislation, individuals or groups are not authorized to access information about the accounts of customers unless the Special Investigation Commission, which was created to combat money laundering and terrorist funding, recommends lifting the secrecy on suspicious accounts.

Last week, a leading Swiss banker told his Lebanese counterparts that the era of banking secrecy was over.

“The banks which attracted tax evaders can no longer continue in this pattern because the era of banking secrecy is over and an era of transparency has begun,” said Jacques de Saussure, chairman of Banque Pictet & Cie.

Bassil said Lebanese banks are involved in the fight against money laundering and are fully complying with Foreign Account Tax Compliance Act, a U.S. federal law that requires American citizens, including individuals who live outside the United States, to report their financial accounts held outside of the country, and requires foreign financial institutions to report to the Internal Revenue Service about their U.S. clients.

“There are other draft laws pertaining to the exchange of tax information and money laundering that are still in the Parliament. We are lobbying hard for their passage this year,” Bassil said.

He added that U.S. authorities and the Financial Action Task Force (on Money Laundering) are satisfied with the procedures and measures taken by the Central Bank and SIC to curb illicit financial activities.

“We are also working on the disclosure of cash in Lebanese borders and points of entry. This cash disclosure is applied in every country in the world,” Bassil said.

He also assured that the measures taken by the SIC would make it more difficult launder money in Lebanese banks.

Secretary-General of the Union of Arab Banks Wissam Fattouh was even more confident that Lebanon’s banking secrecy would remain.

“Lebanon will never abandon the banking secrecy law. This law is attracting funds and deposits from abroad,” Fattouh said.

He said the removal of banking secrecy would have an adverse effect on the volume of deposits.

“I don’t think we will ever reach this stage. The Central Bank and the SIC are fully cooperating with international parties to combat money laundering, and the banks are also sending the files of American citizens who open accounts in Lebanon,” Fattouh said.

He was also confident that other countries would ask Lebanese authorities to exchange tax information about their citizens who reside in Lebanon or have accounts in the country.

“The European countries will follow suit very soon and we should be prepared for that,” Fattouh said.

He stressed that all countries were effectively working on the exchange of tax information and combatting money laundering.

Fattouh said that if an American citizen refused to disclose the amount of his deposit to U.S. authorities then the Lebanese bank would not hesitate to close his account.

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