On August 10, 2023, the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"), in coordination in the United Kingdom and Canada, designated the former governor of Lebanon's central bank, Riad Salameh ("Salameh") and four close associates, pursuant to Executive Order ("E.O.") 13441. According to OFAC's press release, Salameh was designated for alleged "corrupt and unlawful actions [that] have contributed to the breakdown of the rule of law in Lebanon" and his close associates were designated for "having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Salameh." The designations are noteworthy in that they were undertaken pursuant to OFAC's determinations under sections 1(a)(i)(A) and (B) of E.O. 13441 – which provide authority for OFAC designations in response to actions "contribut[ing] to the deliberate breakdown in the rule of law in Lebanon", among other sanctionable activities – rather than E.O. 13818 (the "Global Magnitsky Act E.O."), which authorizes the imposition of sanctions against individuals and entities involved in serious human rights abuses, corruption, or other malign activities, including any person determined to "degrade the rule of law," on a worldwide basis.
Although OFAC most frequently targets corruption and human rights abuses that contribute to the breakdown of rule of law by employing its Global Magnitsky Act authorities, the designations show that OFAC has other authorities to pursue corruption-related designations in Lebanon. To the extent that other Executive Orders (including those that may be issued in the future) are similar to E.O. 13441 in authorizing designations of persons who contribute to the breakdown of the rule of law, OFAC has now demonstrated that significant acts of public corruption may satisfy that criterion for designation.
According to statements in OFAC's press release, Salameh, as governor of the Banque du Liban ("BdL"), i.e., the central bank of Lebanon, "abused his position of power, likely in violation of Lebanese law, to enrich himself[.]" Notably, OFAC alleged that "[i]n one scheme, Salameh — with the assistance of his brother, Raja Salameh (Raja) — used a shell company owned by Raja in the British Virgin Islands, Forry Associates, to divert approximately $330 million from transactions involving the BdL." Salameh also purportedly "funnel[ed] hundreds of millions of dollars through layered shell companies to invest in European real estate", with the assistance of Raja and three other individual associates who helped to "facilitate and conceal" Salameh's corrupt activities. Salameh allegedly diverted funds from the BdL to a "number of property management companies in France, Germany, Luxembourg, and Belgium, that were registered in the names of either Salameh's son, Nady Salameh, or Salameh's former partner, Anna Kosakova." Salameh also allegedly used "shell companies in Panama and a trust in Luxembourg to hide his identity as he purchased shares in a company where his son, Nady, had worked as an investment advisor, only to later sell those shares to a Lebanese bank regulated by the BdL", which OFAC described as a conflict of interest as well as a likely violation of Lebanese law.
These designations reflect the Biden Administration's ongoing focus on imposing sanctions, in close coordination with U.S. allies, against corrupt officials and associates contributing to the breakdown of democratic institutions and the rule of law.
As a result of the sanctions, all property and interests in property of the sanctioned individuals that are in the United States or in the possession or control of U.S. persons must be blocked (i.e., frozen) and reported to OFAC. In addition, entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked. OFAC's designation of Salameh and his associates do not extend to the BdL or the BdL's U.S. correspondent bank relationships, and neither the BdL nor its assets should be considered blocked.
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