Former Lebanese Central Bank Chief Arrested Amid Financial Scandal

Riad Salameh, Lebanon's former central bank governor, has been arrested on fraud charges, marking a dramatic fall from grace for a man once hailed as a financial wizard. The 74-year-old, who led the Banque du Liban (BDL) for three decades, now faces multiple corruption investigations both at home and abroad.

A senior Lebanese judicial source reported that Salameh was taken into custody on September 3, 2024, on charges of money laundering, fraud, and embezzlement linked to a brokerage firm called Optimum Invest. This probe is separate from other ongoing investigations into alleged financial misconduct during his tenure.

The arrest comes just over a year after Salameh left his post in July 2023, following the devastating collapse of Lebanon's financial system in 2019. Once viewed as the linchpin of the country's economy, Salameh's reputation has been severely tarnished by the economic meltdown that has impoverished many Lebanese citizens and frozen most savers out of their bank deposits.

Lebanon's unique banking system, characterized by a high degree of dollarization, was once considered a pillar of the country's economy. However, the system's vulnerabilities were exposed when the country faced one of the worst economic crises globally since the mid-19th century. The Lebanese pound, which had been pegged to the US dollar at a fixed rate from 1997 to 2019 under Salameh's watch, lost over 90% of its value against the dollar since the crisis began.

Salameh has consistently denied any wrongdoing, stating in July 2023 that he had "worked according to the law and respected the legal rights of others." However, his claims of innocence have been met with skepticism as investigations have unfolded.

"I have worked according to the law and respected the legal rights of others."

International authorities have also taken action against the former central bank chief. In August 2023, the United States, Britain, and Canada imposed sanctions on Salameh, accusing him of corrupt actions to enrich himself and his associates. Furthermore, French and German authorities issued arrest warrants for him in 2023, with Interpol Red Notices declaring him wanted by both countries on charges including organized money laundering.

The ongoing investigations extend beyond Salameh himself. His brother, Raja Salameh, is also implicated in allegations of illegally taking more than $300 million from the central bank between 2002 and 2015. Both brothers have denied these accusations.

Salameh's financial strategies have come under intense scrutiny. Critics have described his 2016 monetary operations as a "Ponzi scheme," arguing that they depended on fresh borrowing to pay back existing debt. The central bank has maintained that these operations were legal, but the criticism highlights the controversial nature of Salameh's financial management during Lebanon's economic decline.

The collapse of Lebanon's financial system has had far-reaching consequences. The country's GDP contracted by over 20% in 2020 alone, and Lebanon defaulted on its sovereign debt for the first time in March 2020. The World Bank has described the situation as a "deliberate depression," pointing to the severity and longevity of the crisis.

As Lebanon grapples with the aftermath of its economic meltdown, compounded by political instability and the devastating Port of Beirut explosion in 2020, the arrest of Riad Salameh represents a significant moment in the country's efforts to address alleged corruption and mismanagement at the highest levels of its financial institutions.