The rise and fall of Lebanon's long-serving central banker Riad Salameh

After three decades as the head of the Banque du Liban, the man once hailed as a financial wizard is facing an avalanche of legal cases

Lebanon's former central bank governor, Riad Salameh, now faces charges by Lebanese judicial authorities over the alleged embezzlement of millions of dollars during his tenure, in a humbling blow to a man once lauded as the guardian of country's financial sector.

The judiciary brought charges of “embezzlement, theft of public funds, forgery and illicit enrichment” against Mr Salameh on Wednesday, Lebanon's National News Agency (NNA) reported, one day after his arrest by Public Prosecutor Judge Jamal Hajjar.

The charges are related to an investigation into a massive fraud scheme that saw more than $110 million allegedly embezzled from Lebanon's central bank, known as the Optimum case.

The Associated Press reported that the Lebanese judiciary is looking into the embezzlement of $42 million.

Mr Salameh also faces two arrest warrants, an Interpol notice, and accusations of embezzling more than $330 million from the Banque du Liban (BDL) in a separate case.

These accusations coincided Lebanon's descent into an economic crisis in 2019, which has led to the local currency losing 98 per cent of its value since then.

So how did Mr Salameh go from being a lauded finance expert to the subject of at least seven court cases?

Who is Riad Salameh?

Mr Salameh, born on July 17, 1950, in Antelias, Lebanon, is from a successful business family with a Christian Maronite background, long established in Liberia, West Africa, which is home to a big Lebanese community. He has Lebanese and French citizenship.

He attended the prestigious College Notre-Dame de Jamhour and later pursued a degree in economics at the American University of Beirut, where he met Nada Karam, an author and artist, with whom he had four children – Nadi, Nour, Rana and Reem.

After his graduation in 1973, Mr Salameh joined Merrill Lynch, the American investment and wealth management company, where he worked until 1993.

That year, he was appointed governor of the central bank by Prime Minister Rafic Hariri, for whom he had previously managed a personal asset portfolio at Merrill Lynch.

His mandate was renewed four times, with the last ending on July 31, 2023, making him one of the longest-serving central bankers in the world.

Regarded as a “wizard of finance”, he earned praise domestically and internationally for maintaining financial stability for more than two decades and keeping the local currency's stability at 1,507 Lebanese pounds to the dollar since 1997, despite political uncertainty.

He has received numerous international medals and distinctions from political and financial authorities.

France, which has now issued an arrest warrant for the governor, previously conferred upon Mr Salameh the highest French distinction, Knight of the Legion of Honour, by Jacques Chirac in May 1997. He was promoted to Officer of the Legion of Honour by Nicolas Sarkozy in 2009.

The aura surrounding Mr Salameh was at the time so powerful that no one questioned the governor, his policies, or his enormous real estate portfolio – which the judiciary later suspected he acquired with public funds.

Lebanon's economic crisis crushed the illusion for the general public.

What happened in 2019?

In October 2019, depositors suddenly realised that their high-interest-rate deposits were an illusion, with no real backing in dollars.

Many started to denounce Mr Salameh's huge Ponzi scheme, where the promises of very high returns hid a scheme that relies solely on attracting new depositors to pay returns to earlier investors, rather than generating legitimate profits through exports or investments, for instance.

This triggered an unprecedented financial crisis, causing estimated losses of $70 billion in the financial sector, and locking people out of their savings.

Yet Mr Salameh is not under investigation for his management of the crisis.

In 2021, Switzerland launched an investigation into allegations of money laundering linked to the discovery of suspicious transfers from an account at the Banque du Liban to Europe.

Following this, France, Germany, Luxembourg, Liechtenstein and Belgium initiated their own investigations.

After three years of investigation, they uncovered a complex scheme that allegedly siphoned hundreds of millions of public funds through a secret brokerage contract with Forry Associates, an obscure company based in the British Virgin Islands. Lebanese banks were unknowingly paying a commission to Forry, which is owned by the governor's brother, each time they purchased financial instruments from Banque du Liban, with no corresponding services in return.

The commission proceeds enabled Mr Salameh and his relatives, including his long-time romantic partner Anna Kosakova, whose existence was revealed by the investigation, to amass a vast real estate empire in Europe.

His decades-long term as Central Bank Governor ended on July 31, 2023. He previously denied that any public funds entered his account and denounced what he described as an attempt to make him the scapegoat for Lebanon's financial meltdown.

The Optimum case

In August 2023, another broker emerged: the Lebanese company Optimum. It was first mentioned in BDL's forensic audit, conducted by the consulting firm Alvarez & Marsal.

Auditors suggested in their audit that the Optimum scheme was a continuation of the Forry commissions scheme, after transfers to the latter stopped in 2015.

“This appears to be a continuation of the commission scheme under investigation by Lebanese and international prosecuting authorities,” the auditors wrote in their report.

In April, a new leak revealed more information on these transactions. It showed that the arrangement between Optimum and the BDL might have been used to conceal massive losses at the bank between 2015 and 2018.

Financial experts have described the alleged transactions worth $8 billion as a “fraud scheme” to generate fake gains and obscure mounting losses.

It is also suspected that some of the money shuffled between accounts at the central bank was siphoned off by Mr Salameh. Part of these funds were directed to a commission account – the same account allegedly used by Forry to funnel public funds into European properties tied to Mr Salameh and his relatives.

As other embezzlement cases have been stalled for years amid political interventions despite mounting international pressure, many were surprised by the Lebanese judiciary's action on the Optimum file.

In a country where accountability remains elusive, financial and legal experts warn that this could be a mere show before the case is ultimately dropped.

Meanwhile, Mr Salameh is likely to remain in custody until his hearing later this week. The case is currently with the First Investigating Judge in Beirut, Bilal Halawi, who has requested the interrogation of Mr Salameh and the issuance of an arrest warrant, according to the NNA.

Judge Halawi has been now tasked with leading the investigation, which could potentially lead to a trial.