Transfer of funds to “smuggled” assets: the search for “fresh” dollars

Since banks imposed illegal restrictions on withdrawals and transfers, depositors have started looking for secondary ways to save their money. The first “asylum” destination was the real estate sector, the “lifeguard” for citizens in all emergencies. For years, this sector was marketed as the “best investment”. In all, “real estate” was an option for account holders of more than $ 100,000 as the best solution for those who want to free up their money on the one hand, and for those who want to pay off debts of apartment owners or real estate developers and others. The interest was identical in the payment and receipt of bank checks. However, in a parallel line, another option was found in the “luxury” merchandise stores: to buy luxury cars, jewelry, watches, carpets, paintings, home furnishings, gasoline, diesel … by bank checks or cash in Lebanese pounds.

They are divided into several categories with different orientations: medium account holders, diversifying their portfolio of assets in which they buy (real estate and luxury goods), buying valuable assets to resell them and obtain “fresh dollars”.
In practice, it is true that whoever bought a property “ran away” with their money from the banks, but is trapped in the heart of the “system” and it will be difficult for them to liquidate it soon, in addition to incurring additional costs related to taxes, commissions maintenance and operation, and depreciation. As for those who have bought artistic pieces, a Persian carpet or a gold lira, it can be easy for them to liquidate these goods anywhere in the world in exchange for cash in real dollars.

Although the nature of the “liability” varies, this process is one of the ways to extract money from the banking system and from Lebanon, and is formally similar to those who were able to “smuggle” their money abroad when it was prohibited for a ” small depositor “will withdraw 100,000 pounds. .
This phenomenon arose with the beginning of the crisis that broke out at the end of 2019. Its background is the lack of trust of depositors in the banking sector and their anxiety about the process of decontamination of their deposits. Many press reports have been written in Western publications about this wave. About luxury goods merchants whose sales increased because people wanted to buy with a credit card or bank check. One of them preferred to “invest” the $ 20,000 she had in a wristwatch from famous brands. An expat withdrew $ 200,000 from the bank as a cashier’s check and purchased a number of items classified as luxury. Art galleries have come to receive people who did not know them before, such as collectors, who want to buy them. This wave lasted for months before it started to wane.
According to a financial sector worker, he decided to buy a painting for $ 100,000. “The seller was content to receive the full price as a bank check.” In recent weeks, the conditions changed, “asking to pay a portion of its value in cash.” What has changed? “Traders have begun to realize that a bank check is losing a percentage of its value the further we get into the collapse of the Lebanese pound and the huge difference in value between the Lebanese dollars and the real dollar.”
One art dealer believes that “the wave of buying and selling through checks or credit cards will continue as long as banks impose restrictions on withdrawals.” However, in addition to the decrease in the “attractiveness” of the check, there is another reason for the slowdown of these operations related to the explosion of the port of Beirut, “which changed the interests of the people.” In the first district that was directly affected by the explosion, “a large part of the middle-class people or those with a large balance in the banks. They rearranged their priorities to restore their homes and businesses. This merchant does not hide that the purchase of valuable goods is a “way of re-liquidating them abroad”, indicating that “there is a positive side that differs from those who smuggled large sums abroad, which is that the buyer of goods He bought valuable items in Lebanon, which means moving the business cycle to a certain extent. ” .

The wave of purchases and sales through checks or credit cards will continue as long as banks impose restrictions.

There is a clear indication of what is happening. Banking sector deposits decreased by $ 15.6 billion in the first seven months of 2020, among those who were allowed to transfer funds abroad, those who withdrew their cash from the bank, and those who decided to buy real estate or valuable assets. Today, a bank official says: “Few merchants agree to pay with checks or credit cards, because whoever buys valuable goods sets a goal of selling them and collecting fresh dollars from them. The value of the check has gone down, and the dealer now considers that instead of selling a car, for example, with a bank check that cannot be cashed directly, he can export the car, sell it and profit directly. It indicates that “not all the deposits that were withdrawn by checks were used to finance the purchase of luxury goods or real estate in them, since there is a percentage of them withheld with their owners.” Whoever did not have the check, “rather, I believe that he is thus preserving his money from any deduction of deposits, betting that when matters are resolved and banks are restructured, he will be able to re-deposit it as if it were a new account, without being aware that the procedures can affect the checks according to the date published “.

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