Charbel W.Chahine

The banking system in Lebanon enjoys the most stringent secrecy in the world. Most other countries applying banking secrecy have subsequently published legislation or ratified treaties, causing a loss of banking secrecy characteristics. Although Lebanon has approved Law 318/2001, which dealt with fighting money laundering, in addition to subsequent laws, the banking secrecy system has been preserved on a pedestal, especially when compared with other countries that have ratified their own systems.

On Sep. 3,1956, the Lebanese Parliament ratified a special law to attract foreign capital to Lebanon – the banking secrecy law.

The said law provided in its second article that banks’ managers and employees, as well as any third party, who due to his capacity or position, has access, by any means to the banks’ books, operations and correspondence, are absolutely bound by banking secrecy in the interest of the clients of the banks.

Consequently, they are not permitted to divulge banking secrets to any third party.

Each willful infringement of this law shall can result in imprisonment with duration varying between three months to one year.

It is forbidden to disclose the secrecy of the banking formalities to a third party. Furthermore, it is not permitted to attach any seizure on any funds and assets deposited with a bank, unless obtaining the owners’ written consent.

The Central Bank’s auditor may not, in any case, oblige banks’ managers to disclose the names of their clients, except for debtor accounts. Furthermore, they may not have official contact with any party other than the CEO of the bank. Similarly, banks may establish their accounts in a manner not reflecting clients’ names except for debtor account owners.

Moreover, the Central Bank’s auditors are strictly and fully forbidden, while exercising their auditing, from making inquiries about any issue of fiscal qualification or to intervene therein or to inform any party thereof.

The money and credit law obliged any party currently affiliated with or who was formerly affiliated with the Central Bank, for any qualification, to keep the sole secret according to the banking secrecy law published on Sep. 3, 1956.

Nevertheless, there is a special case agreed upon between banks, wherein banking secrecy is disclosed. Yet, this is the case when information is exchanged between banks regarding the clients debtor accounts only.

Furthermore, law No. 2/67 pertains to banks in suspension of payment being governed by special provisions regarding the bank managers, the members of the board of directors and the auditors. Simply upon accepting the function entrusted to them, they are deemed as having assigned the banking secrecy law, in case the bank ceases payment.

The banking secrecy law was enacted for the interest of the client, who is entitled and upon his request to lift banking secrecy regarding his personal accounts with the bank.

Yet, the exclusions provided for by the law and wherein banking secrecy may be lifted are the following cases:

 Banking secrecy terminates in case of clients’ bankruptcy, whereas his right to manage his funds is transferred to the group of creditors represented by the receiver and the liquidator. Thereupon, the bank has to inform the receiver about the bankrupted client’s relationship with it and on the operations accomplished to its account in addition to the funds deposited with it. Similarly, it has to inform the court, the supervising judge and the experts appointed by the courts about the bankrupted debtor accounts.

 When judicial litigation arises between the bank and its client regarding the banking operation, the banking secrecy terminates with regard to the operation being the object of the litigation as well as the transactions being coherent thereto, additionally to the courts before which the litigation is brought.

 If the account owner is deceased, the bank shall be obliged to give information about his accounts and deposits to the order of his successors or legatees, provided the latter notifies the bank with a judicial judgment of the deceased succession devolution duly approved by the court. Yet, if there are any legatees, the latter must notify the bank with an instrument issued by the execution department and certifying that the will or testament became executory in their favor. Furthermore, the bank is obliged and bound to admit the seizure decision rendered by the execution head department in favor of the legatee. Regarding the testament executor, he may not get acquainted with the legator’s accounts unless after obtaining the relevant authorization given by one of the successors or legatees or issued by the execution department.

r Banking secrecy is lifted with regard to the petitions or orders addressed by the judicial authorities to the bank concerning illicit richness lawsuits. However, Lebanon did not witness any such case to apply this clause since the law concerning it has not been applied.

r However, the new exclusion that set restrictions on banking secrecy in Lebanon was the law on fighting money laundering, as per which banking secrecy may be lifted off the client, within special and specified terms. After facing huge international pressure in 2000 and being listed among 15 uncooperative countries responsible for laundering billions of dollars, Lebanon was obliged to ratify the law on fighting money laundering and therefore its name was taken off the black list in June 2002. By virtue of the new law, an independent commission with a judicial status was established at the Central Bank of Lebanon, and it is not subject to the bank’s authority in conducting the business thereof. The function of the said commission is to investigate money laundering operations and promoting adherence to the rules and procedures pursuant to such law. It is called “the special investigation commission” (CIS). The mission of the CIS is to investigate operations that are suspected to be money-laundering offenses, and to decide on the seriousness of evidence and circumstantial evidence related to any such offense or offenses. In case of a decision on lifting the banking secrecy, the CIS shall send a duplicate of its justified final decision to the appeal general prosecutor and to the higher banking commission as well as to the concerned party, the concerned bank, and the concerned foreign authority, either directly or through the official party through which the information was provided.

Finally, we can say that despite the banking secrecy system exclusions, the laws applied in Lebanon allows its banks to keep attracting foreign capitals, as secrecy is still preserving its effective characteristics. Secrecy is not lifted except in exceptional cases pointed out above, and these have been very few. The banking secrecy act is a private law enacted in favor of the client and broadening its interpretation is not feasible.

Charbel W.Chahine is an attorney at law.