Transferring funds into “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 “resort” was the real estate sector, the “first aider” for citizens in every emergency. For years, this sector was marketed as the “best investment”. In total, “real estate” was an option for account holders of more than $ 100,000 as the best solution for those who want to free their money on the one hand, and for those who want to pay debts from apartment owners or real estate developers and others. The interest was identical on the payment and receipt of bank checks. However, along a parallel line, another option was found in “luxury” merchandise stores: buying luxury cars, jewelry, watches, carpets, paintings, home furniture, gasoline, diesel… by bank checks or cash in Lebanese pounds.They are divided into several categories with different orientations: holders of medium accounts, diversification of the portfolio of goods in which they buy (real estate, luxury goods), purchase of valuable goods with the aim of reselling them and obtaining “fresh dollars”.
In practice, it is true that whoever bought real estate “escaped” with his money from the banks, but he remains stuck in the heart of the “system” and it will be difficult for him to liquidate it soon, in addition to incurring additional costs related to taxes, maintenance and operation fees, and the depreciation of the value. As for those who have bought artistic pieces, a Persian carpet, or a gold lira, it may be easy for them to liquidate these goods anywhere in the world in exchange for cash in real dollars.

Although the nature of “responsibility” varies, this process is one of the forms of extracting money from the banking system and Lebanon, and it is formally similar to those who were able to “smuggle” their money abroad when it was forbidden for a “small depositor” to withdraw 100,000 pounds. .
This phenomenon emerged with the beginning of the crisis that erupted at the end of 2019. Its background is the lack of confidence of depositors in the banking sector and their anxiety over the process of deducting their deposits. Many press reports have been written in Western publications about this wave. About luxury merchandise dealers whose sales boomed because of people wanting to buy by credit card or bank check. One of them preferred to “invest” the $ 20,000 she had in a wristwatch from famous brands. An expatriate took out $ 200,000 from the bank in a bank check and bought a number of items classified as luxury. Art galleries are welcoming people who were not previously familiar with them, as amateurs of “collecting paintings”, who want to buy them. This wave lasted for months before it began to subside.
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? “Merchants have begun to realize that a bank check is losing a percentage of its value the more we go into the collapse of the Lebanese pound, and the huge difference in value between the Libano – dollars and the real dollar.”
One art dealer believes that “the wave of buying and selling via checks or credit cards will continue as long as banks impose restrictions on withdrawals.” However, in addition to the lessening of the “attractiveness” of the check, there is another reason for the braking of these operations related to the explosion of the Beirut port, “which changed people’s interests.” In the first district that was directly affected by the explosion, “A large part of the middle class people or those who have a large balance in banks. They rearranged their priorities towards restoring their homes and businesses. This merchant does not hide that buying valuable commodities is a “way to re-liquidate them abroad,” indicating that “there is a positive side that differs from those who smuggled huge sums abroad, which lies in the fact that the buyer of valuable goods bought them from Lebanon, which means moving the economic cycle to a certain extent.” .

The wave of buying and selling via checks or credit cards will continue as long as banks impose restrictions

There is a clear indication of what is happening. Deposits of the banking sector decreased by $ 15.6 billion in the first seven months of 2020, between those who were allowed to transfer money abroad, those who withdrew their cash from the bank, and those who decided to buy real estate or valuable goods. Currently, a bank official says, “Few merchants still agree to pay with checks or credit cards, because whoever buys valuable goods sets a goal for him to sell them and collect fresh dollars from them. The value of the check has decreased, and the dealer now considers that instead of selling a car, for example, with a bank check that cannot be collected directly, he is able to export the car, sell it and benefit directly. He points out that “not all deposits that were withdrawn by checks were used to finance the purchase of luxury goods or real estate in them, as there is a percentage of them withheld with their owners.” Whoever did not dispose of the check, “Rather, I thought that by doing so he would preserve his money from any deduction of deposits, betting that when matters were settled and the banks were restructured, he would be able to re-deposit it as if it were a new account, without being aware that the procedures may affect checks according to the date Released ».

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