- 09:15
In a surprising move just days before her retirement, Judge Helena Iskandar, Head of the Litigation Department at the Ministry of Justice, filed two motions before the State Council, requesting the Lebanese State’s intervention in the lawsuits aimed at annulling Circulars No.151 and No.165, submitted by lawyers. The conclusion was that the state’s requests were consistent with those of the petitioners, leading to the annulment of both circulars and all related actions or outcomes, as they were deemed to violate applicable laws, particularly the Code of Money and Credit. This decision aimed to safeguard legal order and protect depositors’ funds.
Referring to the facts, former Central Bank (BDL) Governor Riad Salameh issued Circular No.165 on April 19, 2023, to regulate electronic cash settlement operations. The circular defined cash funds as money transferred from abroad or received as foreign currency banknotes after November 17, 2019, and cash that will be deposited in Lebanese pounds (LBP) into newly opened accounts.
Circular No.151 was issued on April 21, 2020, setting the withdrawal exchange rate at LBP 3,900 per US dollar. It was later extended with adjustments, reaching LBP 15,000 per dollar in February 2023. Released by BDL to regulate cash withdrawals and transfers, the circular allowed dollar deposits to be withdrawn at a rate higher than the official LBP 1,500 but below the black-market rate. It initially capped withdrawals at approximately $100 per month.
Paradoxically, circular No.151 is no longer in force, as it was abolished by the BDL Acting Governor over a year ago due to the failure to renew or extend its validity. This prompts questions about the legitimacy of accepting a lawsuit aimed at annulling a circular that no longer exists, as it is legally invalid to seek the annulment of something that is no longer in effect.
Circular No.165 was introduced to address the financial and monetary challenges resulting from the banks' inability to fund deposit withdrawals, due to the Lebanese State's failure to settle its debts and obligations to BDL, which in turn finances the banks. Since then, the Lebanese government has neither assumed responsibility for resolving the crisis nor acknowledged its obligation to repay its debts to Lebanon’s Central Bank.
In response to this situation, BDL issued a circular in April 2023 to regulate electronic cash settlement operations, distinguishing between “fresh” funds and those held in banks before November 17, 2019. The circular effectively achieved its objectives of reducing the cash economy and combating money laundering and terrorist financing in Lebanon, in line with the recommendations of the Financial Action Task Force (FATF).
It is important to note that the 2024 FATF report, released before Lebanon was placed on the gray list, highlighted the effectiveness of the measures taken by BDL to combat money laundering and terrorist financing, as well as reducing the cash economy. According to the report, both the Central Bank and the banking sector are not accountable for Lebanon's inclusion on the gray list, as they fully comply with international standards.
Thus, Circular 165 is pivotal in mitigating the risks of Lebanon’s inclusion on the gray list, especially regarding correspondent bank relationships, managing the Lebanese pound money supply, and curbing the cash economy. This was achieved in coordination with the Ministry of Finance, which enacted measures to regulate LBP cash transactions through banks, including administrative and other financial dealings.
Sources suggest that Judge Claude Ghanem, Deputy Government Commissioner at the Military Court and successor to Judge Helena Iskandar as Head of the Litigation Department at the Ministry of Justice, fully acknowledges the significance of BDL measures. This contrasts with Iskandar, who has been accused of political bias by some in the “BDL and the Banks” case and of maintaining close ties with Mount Lebanon Prosecutor, Judge Ghada Aoun, who is set to retire on March 25.
Currently, Ghanem is thoroughly reviewing the feedback on Circular 165 to determine the appropriate action regarding the suspension of Iskandar’s ruling, carefully assessing the potential economic and banking consequences of any decision.
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