Author Archives: Sandy Alkoutami

Cleaning up Corruption in Lebanon’s Central Bank

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Riad Salameh, the governor of Lebanon’s Central Bank (the Banque du Liban, or BdL), was once hailed as a “financial wizard” for his stewardship of the Lebanese banking system. But a flurry of recent investigations, led mainly by French and Swiss prosecutors, have implicated Salameh in a variety of corruption schemes. These investigations found, among other things, that Salameh illicitly moved over $300 million of public funds from the BdL into his brother’s company, Forry Associates, between 2002 and 2015 and that Salameh laundered millions in Europe through luxury real-estate purchases. And in March 2022, after Swiss prosecutors asked Lebanese authorities to carry out a separate investigation into embezzlement and money laundering by Salameh and his associates, a Lebanese district court judge charged Salameh and his brother with illegal enrichment and money laundering.

Though Salameh denies all allegations, many Lebanese citizens consider the accusations against him unsurprising. Indeed, if anything is surprising about the case against Salameh, it’s that he is being prosecuted in Lebanese courts. Government elites in Lebanon—including the BdL’s leaders—have long benefited from a culture of impunity. It is encouraging to see Lebanese prosecutors and courts taking steps to hold corrupt actors at the BdL accountable. But cleaning up the BdL, and ensuring that in the future cases like Salameh’s are detected early or prevented altogether, will also require more structural reforms to address the institutional and regulatory problems at the BdL that have enabled such corrupt practices. Three reforms to the BdL are especially important:

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Humanitarian Aid Corruption in Regime-Held Syria: How Should the International Donor Community Respond?

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In response to the humanitarian disaster caused by Syria’s ongoing civil war, international aid has poured into the country, to the tune of over $40 billion since 2011. Yet 14.6 million people (out of a total Syrian population of approximately 18 million) remain in need of some form of humanitarian assistance. One of the main reasons that so many people remain in need is the Assad regime’s systematic co-optation and corrupt diversion of international aid. The regime has required that foreign donors partner with one of two local Syrian organizations—the Syrian Arab Red Crescent (SARC) and Syria Trust for Development (founded and run by President Assad’s wife); these government-affiliated organizations can then deliver aid money “out of sight” of the international organizations that sent that money, thereby obstructing aid workers’ ability to ensure that aid is distributed based on need. The government also mandates that all international organizations in Damascus hire local personnel hand-selected by the regime who supervise all programming and select which beneficiaries receive aid. These tools enable the Assad regime to use aid for political purposes, and to corruptly divert tens of billions of aid to politically connected elites, many of whom are responsible for the human rights violations that made humanitarian aid necessary to begin with.

For those whose top priority is to help suffering Syrians, it may be tempting to ignore or downplay the corrupt diversion of humanitarian aid—to view it as the unpleasant but inevitable cost of doing relief work in a country ruled by a despot. But continuing with the status quo is not a viable option. Right now, the aid pouring into Syria is helping the regime much more than it is helping suffering civilians, and it would be irresponsible to ignore this fact. Does this mean the international community should simply suspend humanitarian aid to Syria altogether? That option is also unpalatable. For one thing, it would impose grave costs on Syrian civilians: Even if the regime steals or misdirects up to 90% of incoming humanitarian aid, the 10% that ordinary Syrian civilians currently receive is still better than nothing. Furthermore, a decision to halt aid completely could also send the message that the international community does not think helping Syrian civilians is worth the hassle.  

If neither continuing the current approach to delivering humanitarian aid nor suspending aid altogether is acceptable, what should the international donor community do? There is no good answer to this question, but as the humanitarian crisis in Syria shows no sign of abating, the international community must do what it can to find ways to get aid to the citizens who need it most. There are a few measures that, while imperfect, might be helpful:

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The Assad Family’s (Anti)Corruption Playbook: Patronage and Pruning

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The Syrian civil war is an unfathomable and ongoing tragedy. In addition to the direct destruction and loss of life, the war has plunged Syria’s already troubled economy into an even  deeper crisis. A shocking 90% of the Syrian population lives in extreme poverty, and roughly 60% of the country does not have adequate food. Since 2010, the economy has contracted by 60%, while inflation has increased by over 300% and the value of the Syrian lira has depreciated by over 700%. Yet President Bashar al-Assad and his loyal networks of regime insiders and elite businessmen continues to profit, thanks in large part to rampant corruption. Assad and his friends have diverted tens of millions in humanitarian aid, forced families of detainees to pay bribes to visit them or win their release, and pocketed and re-sold rationed wheat on black markets. Most recently, the Syrian regime and its business partners have turned the country into a narcostate. In a damning investigation released at the end of 2021, the New York Times found that the Fourth Armored Division of the Syrian Army—commanded by Assad’s younger brother, Maher al-Assad—is behind the production and distribution of the amphetamine captagon.

This story sounds depressingly familiar: In all too many countries, a tiny elite of privileged insiders gets rich from corrupt practices, while ordinary people suffer extreme deprivation. But in Syria there is a twist: In the last two years, the Assad regime has also been carrying out a ruthless anticorruption campaign, one that has targeted some of his own loyalists. For example, in 2020 Assad went after his cousin and close friend Rami Makhlouf, a once-untouchable business tycoon who at one point was estimated to control 60% of the Syrian economy. More recently, Assad detained and seized the assets of five loyal executives at Syria’s second-largest cellphone company.

This seems like a paradox: Assad’s anticorruption campaign is unfolding alongside his circle’s ongoing abuses of power. But in fact this is true to form. Starting during the reign of Bashar al-Assad’s father, Hafez Al-Assad (henceforth Hafez), the Assad regime has followed a pattern of “patronage and pruning” to manage the inherent tension between, on the one hand, cultivating elite support by allowing loyal elites to exploit public power for private gain, and, on the other hand, preventing public discontent with corruption from getting so out of hand that it threatens the regime’s stability and authority. Continue reading →