For more than a decade, Lebanon’s central bank charged commercial banks in the country commissions when they bought government securities without making clear that the bulk of those commissions went to a company controlled by the brother of the central bank’s governor, according to documents seen by Reuters.
Four contracts between Banque du Liban (BDL) and a Lebanese commercial bank seen by Reuters, dated from 2004 to 2014, state that the bank entering into the contract agreed to pay 3/8 of 1 percent commission on purchases of government certificates of deposit worth millions of dollars. Such contracts were standard for commercial banks making such purchases at the time, two senior executives in the finance industry told Reuters.
The contracts seen by Reuters make no reference to Forry Associates, a company controlled by Raja Salameh, brother of central bank governor Riad Salameh. That company ultimately received such commissions, Riad Salameh told Reuters in an interview in November. His brother, Raja Salameh, could not be reached for comment.
Forry’s “only job was to gather all these commissions and fees and redistribute according to the instructions,” Riad Salameh told Reuters, without specifying what these instructions were. Salameh said the commissions were transparent and approved by the board of the central bank, and that no one raised any complaints at the time.
Halim Berti, a spokesman for BDL, told Reuters the central bank’s board could not respond to questions about its decisions, as only the governor was authorized to speak on behalf of the bank. The commissions, and where they went, are the subject of investigations in Europe and Lebanon.
Swiss authorities suspect the Salameh brothers may have illegally taken more than $300 million in this way from BDL between 2002 and 2015, laundering some of the money in Switzerland, according to a letter the Swiss attorney general sent to Lebanese officials last year, which was seen by Reuters.
The Swiss attorney general’s office told Reuters it is conducting a criminal investigation into suspicions of “aggravated money laundering related to alleged embezzlement offences to the detriment of BDL,” but declined to comment further for this story. Salameh said such commissions as those in the contracts seen by Reuters were paid to Forry. He denies embezzlement, saying none of the commission money belonged to the central bank, a publicly owned institution.
He told Reuters that the commissions were paid into what he called a “clearing account” at the central bank, and then subsequently paid to Forry. He said he hired the audit firm BDO Semaan, Gholam & Co to look into the matter. The auditor’s report found that “no funds belonging to BDL went into this account,” Salameh told Reuters in November. He declined to show the report to Reuters. BDO Semaan declined comment.
However, details of the contracts seen by Reuters, which have not previously been reported, show that the commissions were to be paid to BDL. Three contracts, written in Arabic and printed on paper bearing the central bank’s letterhead, state: “We authorize you to deduct a commission of 3/8 of 1 percent,” where “you” refers to the central bank. In none of the contracts is Forry mentioned.
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