Lebanon's Riad Salameh: from financial wizard to public enemy number one

Lebanon's once acclaimed former central bank governor was arrested in Beirut on Tuesday in a move that sparked surprise among the population that for years have watched the country's corrupt leaders seemingly evade accountability for its devastating four-year economic collapse.

Riad Salameh was arrested by a public prosecutor and questioned on suspicion of financial crimes related to transactions between brokerage company Optimum Invest and Lebanon’s central bank.

It was a landmark moment for the banker who had so far managed to evade arrest, despite numerous charges at home and abroad of financial crimes, including the embezzlement of hundreds of millions of dollars and laundering state funds abroad.

In a development on Wednesday, he was charged by financial prosecutor Ali Ibrahim for embezzlement, stealing public funds and illicit enrichment, according to the state-run National News Agency.

According to one Swiss investigation, he is accused of laundering some $300 million from state funds. He has consistently denied all charges.

The 74-year-old ran Bank du Liban for 30 years becoming the longest-running central bank governor in the world, after stepping down in July 2023.

But it was during his tenure that the country endured its worst financial crisis since the civil war that saw the state default on its foreign exchange reserves, triggering a liquidation crisis and prompting the Lebanese pound to lose over 90 percent of its value against the US dollar.

Economists have compared Salameh’s "financial engineering" policies of 2016 which saw the bank borrow money to pay existing creditors and attract foreign reserves to a Ponzi scheme.

As the economy began to teeter at the end of 2019, nationwide protests erupted calling for the ousting of the political establishment and an end to decades of corruption.

But as the protests took hold, the central bank implemented dramatic measures to stem the economic collapse, including blocking depositors’ access to life savings and curtailing US dollar withdrawals.

'Suddenly behind bars'

Tuesday’s surprise arrest was welcomed by political and activist circles in Lebanon who have been campaigning for action against Salameh and other establishment figures for years.

However, others were sceptical at whether his sudden arrest – the first since a plethora of charges have been issued against him, including in at least four European countries - is an attempt to evade justice abroad.

Judge Ghada Aoun who is pursuing a separate corruption case against Salameh called his arrest an "historic event”, but stressed that all legal proceedings against him must be pursued so that "people can truly believe that the fight against corruption in Lebanon has begun".

Lebanese French-language newspaper L’Orient Le Jour ran a front-page story headlined: 'Riad Salameh, Lebanese finance's fallen king'.

Daily Al Joumhouria, known for its affiliation to Lebanon’s Christian parties, ran a headline with an Arabic proverb that Riad Salameh's luck has apparently run dry.

An-Nahar’s front page spoke for much of the country with 'Suddenly… Riad Salameh is behind bars!', while Shia-affiliated Al Akhbar showed a little wariness with the question: ‘Has Riad Salameh finally fallen?’.

Other commentators questioned the timing of Salameh's arrest after four years of hiding from arrest.

Some questioned the affiliations of prosecutor Jamal Hajjar and his intentions to prosecute Salameh. It has been suggested that if Salameh shows cooperation with a Lebanese investigation, the cases abroad might be weakened.

From global financial stardom to an Interpol warrant

Once referred to as the "magician of finance" by pockets of the global banking world for his apparent ability to ride Lebanon unscathed through the 2008 global financial crash, Salameh has been adorned with awards and sits on multiple boards including at the International Monetary Fund and the Arab Monetary Fund.

He was named the world’s best central bank governor by Euromoney in 2006 and The Banker magazine in 2009 with his fiscal policies praised by economists at the IMF and World Bank.

But those accolades aged badly when his reputation was shredded after the state hit near bankruptcy in 2020 and Lebanon made global headlines for its economic downfall.

A glistening financial sector which gained the moniker ‘Switzerland of the Middle East’ was replaced by bordered-up banks, protests, and depositors even holding bank staff at gunpoint.

Despite the chaos, he maintained credibility among Lebanon’s Christian political circles and was largely regarded as protected by then-President Michel Aoun, who presided over the economic crisis. Other leaders, such as caretaker Prime Minister Najib Mikati and House Speaker Nabih Berri have also been accused of protecting the governor.

Indeed, last July hundreds attended a leaving party for Salameh, posing for selfies with a man issued an Interpol arrest warrant just months earlier while much of the population faced poverty from a collapsed currency and skyrocketing inflation.

In May last year, French authorities issued an Interpol Red Notice against Salameh for alleged financial crimes.

That followed sanctions by the UK, US and Canada against Salameh and three associates, for “their role in the diversion of over $300 million” from the central bank.

Salameh’s brother Raja and son Nady have also been targeted by sanctions and travel bans related to offshore accounts, including a sprawling real estate collection in London.

'Most hated man in Lebanon'

Regarded by the Lebanese as the key player behind the country’s economic collapse – labelled by the World Bank as one of the worst globally in over 150 years – Salameh has rarely been seen in public since leaving office.

His former office, the headquarters of Bank du Liban on Hamra Street in Beirut’s commercial district, has been shuttered with metal doors and fenced off by barbed wire for years after it became a hotspot for clashes between security forces and protesters, angry about what is regarded as state theft of public money.

Salameh enjoyed high-level backing from the political and business elite who for years profited off unabated lending and high interest rates. From the outset of the financial crash, the ex-bank governor blamed the government for profligate spending rather than the central bank.

But his pleas were never swallowed by the Lebanese, who labelled him public enemy number one and his image is regularly seen on protest posters and buildings across the capital.