Bank Releases Depositor Funds in Alleged Quid Pro Quo Arrangement, Raising Legal and Ethical Concerns

Reports circulating in financial circles describe a troubling transaction at a Lebanese bank: an individual claiming to hold Iraqi intelligence credentials, identified as Tariq al-Husseini, allegedly met with the bank's board chairman and secured the full release of deposits belonging to an Iraqi businessman with an account at the institution. According to accounts of the incident, the arrangement came with promises to facilitate the bank's operations in Iraq, where the bank maintains a branch.

When questioned about the matter, sources close to the bank denied the transaction occurred. However, the absence of an official and definitive public statement from the bank itself has failed to dispel widespread skepticism about what transpired.

The implications of such an arrangement extend well beyond financial considerations. Legal experts emphasize that the transaction, if accurate, would constitute a fundamental breach of banking principles. A specialized source explained to local media that the action violates the principle of equal treatment among depositors, which should govern all banking operations under uniform standards. This becomes particularly significant given the informal restrictions on withdrawals that have existed since Lebanon's financial crisis.

Preferential treatment of one depositor over others could constitute arbitrary conduct or unlawful discrimination among parties with equal rights. Such actions may prompt other depositors to initiate legal proceedings or demand equivalent treatment. The source stressed that this incident warrants inclusion in investigations being conducted by the financial prosecutor regarding fund transfers, as it represents preferential handling of one creditor at the expense of others.

Beyond the legal dimension, the case raises concerns about the use of political and security influence in banking operations—a practice rejected internationally. The incident prompts questions about whether similar arrangements have occurred elsewhere without detection. While ordinary Lebanese depositors saw their funds frozen in the form of "lollars," this individual allegedly leveraged personal connections to convert blocked currency into actual dollars—a stark disparity that observers describe as deeply troubling.

Legal experts contend that such practices violate the financial regulatory law, deposit recovery legislation, and banking restructuring statutes. They call for investigations by the Central Bank of Lebanon, the banking supervision committee, the financial prosecutor, and the special investigation body tasked with combating money laundering.

The social consequences of selective deposit returns are equally concerning. Experts warn that such selective reimbursements reinforce perceptions of injustice among depositors and entrench the notion that rights are recovered only through influence or pressure. This erodes the remaining confidence in the banking sector and undermines efforts to restructure the financial system and restore normal economic activity.

Political Will Remains Elusive on Financial Gap Law

Against this backdrop of delay and arbitrary treatment that has plagued depositors for years, the financial gap law—which has sat in parliament for approximately five months—remains unstudied by the finance and budget committee. The legislation appears shelved, with lawmakers currently focused on general amnesty legislation, citing the constraints imposed by ongoing financial and economic warfare.

Nassib Ghobril, an economic expert and head of research at Byblos Bank, described the situation surrounding the financial gap law and deposit reimbursement as a "hot potato" being tossed between the government and parliament, with each side attempting to avoid responsibility.

Ghobril noted that the government finalized a deposit repayment law before the end of last year under external pressure, acknowledging its imperfections while highlighting its vague and unimplementable provisions. The government failed to conduct cost modeling for the law's stated objective of returning $100,000 to depositors over four years. Analysis reveals the law would cost $22 billion, requiring $9.5 billion in the first year alone—funds that do not exist.

The expert rejected the argument that an imperfect law is preferable to no law, noting that depositors remain unconvinced. While parliament now bears responsibility for the draft law, he explained that early 2026 priorities included passing the annual budget within constitutional deadlines, which parliament accomplished. Subsequently, legislative elections created uncertainty regarding diaspora voting procedures, with many parties seeking implicit parliamentary extensions. During this period, signals from the finance committee suggested deliberate delays in studying the gap law until after elections.

When war erupted in March, Ghobril observed, it effectively provided parliament with convenient cover for legislative inactivity. As general amnesty legislation was debated, voices emerged calling for prioritization of the financial gap law, which constitutes a condition for any International Monetary Fund agreement. However, Lebanon remains unable to implement required reform conditions, and the IMF understands the country cannot meet any agreement obligations.

Following criticism from various quarters, parliament promised to begin studying the gap law soon. Yet even if examination commences immediately, passage will require considerable time due to ambiguous provisions requiring amendment. Critically, the law must become implementable. Current studies indicate only six banks can repay $100,000 over four years, necessitating parliamentary modifications to enable banks to meet their obligations.

Ghobril emphasized that current financial conditions and war consequences cannot serve as pretexts for avoiding action on the gap law. The parliamentary extension, he argued, amounted to a gift to lawmakers with no accompanying accountability, allowing them to drag their feet on legislative study.

The expert reminded that the Central Bank of Lebanon maintains reserves of $11.5 billion as of late April, having declined by $446 million during March and April. During the 2024 war, reserves fell $530 million—a natural occurrence—yet central bank reserves increased by $2.9 billion between July 2023 and April 2026.

Lawmakers understand the Central Bank's capacity and commercial bank liquidity, Ghobril stressed, and this knowledge should motivate them to develop solutions involving state participation rather than remaining passive observers. Monetary and credit law, particularly Article 13, establishes that commercial bank deposits at the Central Bank constitute commercial debt and a Central Bank obligation to banks. Article 113 stipulates that any losses incurred by the Central Bank are covered by the treasury regardless of timeframe.

Addressing this matter requires political will, which remains absent, Ghobril concluded. The gold holdings are treated as decorative museum pieces rather than investment tools, with no serious discussion of leveraging their elevated global prices while preserving the asset. All of this remains tied to political will at the national level.