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BCCI: Lessons for the World
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20198 |
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CURRENT ISSUES
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| Issue
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1 / 1992 |
2,687 Words |
| Author
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Eugene Sarver
Eugene Sarver is professor of finance at the Lubin Graduate
School of Pace University in New York. |
Just as we were recovering from the brunt of the S & L, junk bond, and insurance debacles, BCCI, the Bank of Credit and Commerce International, burst on the scene, a "stealth bank" that flew under the regulatory radar. Called "the largest bank fraud in world finance history" by the "dean" of district attorneys, Manhattan's Robert Morganthau, and "the world's sleaziest bank" in a major cover story, it has lived up to its informal moniker as the "Bank of Crooks and Criminals International." Not only are 25-75 percent of the bank's assets essentially fraudulent, as are much of its reported profits, but it became the bank of choice for terrorists such as Abu Nidal, drug smugglers/money launderers such as the Medellin cartel and Manuel Noriega, and arms dealers and spies, including the CIA in its Pakistan-Afghanistan operations. It was also patronized by Saddam Hussein, Ferdinand Marcos, and Jean-Claude Duvalier also patronized it, and it was involved in the Iran-Contra dealings. Moreover, it illegally purchased several banks in the United States, notably the $10.3 billion First American Bankshares in D.C., the capital's largest bank holding company.
BCCI was founded in 1972 by a Pakistani visionary, Agha Hasan Abedi (now a wheelchair-bound sixty-eight-year-old heart patient in Karachi), with $10 million from Middle Eastern investors and the Bank of America (which sold its ownership interest in 1980, while remaining BCCI's U.S. clearing bank), and the avowed goals of championing the Third World and creating the Muslim world's first banking powerhouse. By the time most of BCCI was closed down in July 1991 by bank regulators in 44 countries, led by the Bank of England and Luxembourg's Monetary Institute, it had grown into a $20 billion institution, equal in size to America's 33rd largest bank. Sheikh Zayed of Abu Dhabi owned 77 percent of it, and it was operating in 69 countries. Its 400 branches were staffed by 14,000 employees, two-thirds of whom were Pakistanis. Headquartered in Luxembourg, a loosely regulated offshore banking center, it operated through two major subsidiaries, one in Luxembourg, and another in the Cayman Islands, also a permissive banking center. However, its major retail operation was in England, where it was the largest foreign bank with 45 branches and 120,000 accounts; it had extensive retail operations as well throughout Asia, Africa, and Latin America.
BCCI was really two banks. Its façade was that of a ubiquitous, fast-growing international bank, with a cadre of skilled personnel (drawn to it by its above-average salaries), especially versed in trade finance and offering attentive service in plush surroundings. Most of its employees were honest, hard-working individuals only vaguely aware of
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