Bank secrecy. (c1997)

Abstract

Lebanese banking secrecy laws were passed in 1956 during the presidency of Camille Chamoun. At the time , it was believed that Lebanon could benefit from the unstable political situation in the Arab world, particularly after the revolutions in Egypt and Iraq, and attract expatriated capital belonging to these countries' former ruling elite. This was facilitated by the fact that the Swiss banking system was burdened with a huge surplus in deposits, resulting in declining interest rates, thus encouraging investors to relocate their capital to other secrecy havens, among them Lebanon. During the 1960s and early 1970s, the system worked well and the Lebanese banking system thrived . The civil war however, was the catalyst allowing various money laundering operations, generally connected with revenues from arms deals and drug smuggling, to flourish. This and the gradual integration of money markets around the world, has subjected countries with bank secrecy laws to closer scrutiny. National governments as well as the international community have been working on eliminating safe havens for ill-gotten money. The Insider Law adopted in 1988, the law on Money Laundering adopted in 1990, and other limitations to Swiss bank secrecy such as the Swiss Law on International Mutual Assistance in Criminal Matters (IMAC-1983), have been widely supported by Swiss banks, underscoring bankers' assertion that secrecy was never intended to protect criminals. The Swiss example is expected to be followed by several other countries that are facing similar pressure to tighten their secrecy laws. To counter any potential objections and build-up a good reputation abroad, Lebanese banks and authorities are anxious to reassure international suspicions by not condoning any money laundering activities. Nevertheless, the paradox and attraction of banking secrecy legislation, if fully implemented, is precisely that it is secret and therefore that it shields illegalities. The purpose of this research project IS to see where Lebanon stands today with respect to the changes on the international arena, given its well-established and protective traditions of bank secrecy for private clients? How will Lebanese banks react to the changes and what actions will they adopt?