Seizure of $150 million in LCB funds was preemptive

Funds were soon to be released from escrow

Banque Libano-Francaise (BLF) has released to US authorities $150 million held in an escrow account at the bank. The funds are related to the sale of assets and liabilities of the now defunct Lebanese Canadian Bank (LCB) to SGBL, which took over some of LCB’s assets.

The seized funds are substitutes for the money in the LCB escrow account at BLF. A total of $150 million were earlier seized by the US Drug Enforcement Agency (DEA) from a BLF correspondent account at a bank in New York and transferred to a seized assets account maintained by the United States Marshals Service pending resolution of a forfeiture action related to the Lebanese Canadian Bank affair.

The funds were seized pursuant to seizure warrants issued on August 15, 2012. The funds originally seized from the BLF account at a US bank were used by BLF to conduct regular currency transactions. To release the bank’s funds, BLF released the money in the escrow account.

The seized funds were set to be released from escrow next month. The DEA action was preemptive to avoid losing access to the funds after their final release. A source close to the transaction said that the release of the funds to US authorities was in compliance with the terms agreement governing the escrow account.

The $150 million are part of the $580 million paid by SGBL to acquire most assets and liabilities of LCB after the defunct bank was pursued by US authorities. “There are no allegations of wrongdoing against BLF, SGBL, or the US bank that maintains the correspondent account for BLF in the US,” a DEA statement said.

The $150 million were deposited in an escrow account as a guarantee against unseen liabilities or actions arising from the US led investigation. The LCB funds in escrow are traceable to the assets of LCB. They are subject to forfeiture, but since they are in an account in Lebanon, the US was unable to seize the funds directly.

US laws, allow seizure of funds located in a bank’s correspondent accounts in the US if there is probable cause to believe that funds subject to forfeiture are on deposit with that bank overseas. Based on this provision and others, the seizure warrants were executed.

BLF in a statement said it “acted as an escrow agent for part of the funds related to the Sale and Purchase Agreement of assets and liabilities of (LCB). The amount seized relates to the Escrow Account. The seizure has no impact on BLF business activity.”