Bank of Credit and

Commerce International
Corporate Scandal

What Was BCCI: A Timeline From 1972 To Today

BCCI's conception, growth, collapse, and criminality are inextricably linked with the personality of its founder, Pakistani banker Agha Hasan
Abedi, who nominally founded the bank in 1972.
Following nationalization of United Bank (1970), Abedi created a bank that would operate in a manner to defy the ability of the Pakistani
government, or any other, to impede any objective it might seek. It would be the first global, international, and indeed, trans-national bank,
and something more: a charity, a foundation, a shipping empire, an insurer, a brokerage firm, a commodities exchange, a publishing house,
a world-class hospital for the rich, a real estate empire, an employee cooperative, an Islamic investment bank, and a Third World
powerhouse.
Five essential elements in creation of BCCI: 1) secrecy and confidentiality haven (Luxemburg, Grand Cayman); 2) source of capital ($2,5 M
BoA; $0,5M Sheikh Zayed of Abu-Dhabi; 3) source of initial assets ($100M half from Sheikh Zayed; 4) a group of like-minded
Pakistani to operate the bank; 5) credibility in the international community through relationship with an established Western financial
institution Bank of America.

BCCI's exponential growth throughout Middle East, Africa, Asia and Americas fueled in part by infusions of petrodollar deposits from Gulf
State rulers during the hey-day of the OPEC years branches in 73 countries and assets totaling about $22 billion.
Building a spider-web structure of parallel banks with a centre in Luxembourg, acquisition of majority stakes in foreign banks by using
front-men or nominees.
BCCI becomes the largest foreign bank operating in Africa as a result of its willingness to do things that most Western banks were not.

During a hearing in February 1988 by the Committee on Foreign Relations on General Noriega's drug trafficking and money laundering,
BCCI was identified as facilitating Noriega's criminal activity. In March 1988, the Foreign Relations Committee authorized the issuance of
subpoenas to BCCI and those at the bank involved in handling Noriega's assets. The investigation was obstructed by the Department of
Justice. Big breakthrough with involvement of NY District Attorney Robert Morgenthau and Subcommittee Chairman Senator John Kerry.
Deloitte & Touche - the Provisional Liquidators were appointed on 5 July 1991.
Many actions are still being progressed through the relevant Court and will take a number of years to bring to a conclusion. There are in
2
excess of 70,000 creditors
with admitted or in progress claims with a value of $9 billion.

1972
1980s
1990s
Today

What Was BCCI, Actually?

Bank of Crooks and Cocaine, Inc

The structure was conceived by Abedi and managed by Naqvi for the specific purpose
of evading regulation or control by governments. It functioned to frustrate the full
understanding of BCCI's operations by anyone.

Fraud by BCCI and BCCI customers involving billions of dollars; money laundering
in Europe, Africa, Asia, and the Americas; BCCI's bribery of officials in most of those
locations; support of terrorism, arms trafficking, and the sale of nuclear
technologies; management of prostitution; the commission and facilitation of income
tax evasion, smuggling, and illegal immigration; illicit purchases of banks and
real estate; and a panoply of financial crimes limited only by the imagination of its
officers and customers.

How Did BCCI Hide All This? (I)

To achieve its goals, BCCI relied on a range of machinations

Record Keeping. BCCI's decision to divide its operations between two auditors, neither of whom
had the right to audit all BCCI operations. BCCI also provided loans and financial benefits to some
of its auditors.
Complex Corporate Structure. Layering of entities, related to one another through an
impenetrable series of holding companies, affiliates, subsidiaries, banks-within-banks, insider
dealings and nominee relationships.
Illusion of Growth. Focused attention on individuals and entities who controlled large sums of
cash - central bank officials, heads of state, "high net worth individuals," and black marketers - to
disguise operating losses and underlying lack of working capital.
Bribes. Prominent political figures, auditors and others were bribed.
Circumvented Regulatory Barriers. Secret ownership of banks, with activities shielded by
lawyers, accountants, public relations firms and political/intelligence agents.
Lack of Co-ordination. The Justice Department, the CIA, U.S. Treasury Department, Federal
Reserve, the FDIC, and the OCC all failed to share information that could have exposed BCCI.
Lies and Deception. Shell corporations and bank confidentiality and secrecy havens, use of front4
men and nominees, guarantees
and buy-back arrangements; back-to-back financial documentation

How Did BCCI Hide All This? (II)

as well as a complex web of relationships.

Lawyers,
Auditors,
Accountants
CIA

PR firms

BCCI
Prominent
Political

Bankers

Figures

Govt. of
Abu Dhabi

Regulators

What Do The Conspiracy Theorists Say? (I)

Two rather critical facts, however, were invariably left out of the storyeven during the lengthy soap opera
trial of former BCCI attorney Robert Altman.
The first fact was the extraordinarily close alliance between BCCI and some of Britain's most powerful financial
houses and aristocratic families.
The second fact was that BCCI was created, and then built up as a "world class" bank, primarily to manage the
covert funds that poured into the secret war in Afghanistan. Hardly any mention was made of the fact that
BCCI was in the middle of the Afghan effortserving as the de facto central bank for a multibillion-dollar
Golden Crescent illegal arms-for-drugs trade that mushroomed during 1979-90.
When the last of the Red Army troops pulled out of Kabul in February 1989, the massive British-devised and
American-led covert action program in support of the Afghan mujahedeen began to wind down. BCCI lost its
raison d'tre, and went the way of the 1960s-era Investors Overseas Service (IOS), and the Vietnam War-era
Nugen Hand Bank of Australia: The money was siphoned out, a diversionary scandal was manufactured, and its
doors were shut.
During the decade of the Afghan War, BCCI's assets had grown from an initial capitalization in 1972 of $2.5
million, to $4 billion in 1980, to an astounding $23 billion at the point that the Bank of England moved to shut
it down. The bulk of the $23 billion disappeared and to this day is still unaccounted for.
Source: The Real Story of BCCI, Bill Engdahl and Jeffrey Steinberg, Executive Intelligence Review,
October 13, 1995

What Do The Conspiracy Theorists Say? (II)

Former Senate investigator Jack Blum summed up the BCCI case in 1991 testimony before
a congressional committee: "This bank was a product of the Afghan War and people very
close to the mujahedeen have said that many Pakistani military officials who were deeply
involved in assisting and supporting the Afghan rebel movement were stealing our foreign
assistance money and using BCCI to hide the money they stole; to market American
weapons that were to be delivered that they stole; and to market and manage funds that
came from the selling of heroin that was apparently engineered by one of the mujahedeen
groups."
Source: The Real Story of BCCI, Bill Engdahl and Jeffrey Steinberg, Executive Intelligence
Review,
October 13, 1995
7

How Did BCCI Unravel?

Circa 1983:
American law enforcement officials uncover evidence of money laundering at
BCCIs Cayman Islands
Bank. Nothing was done.
October, 1988:
arrest of
1990).

US Customs Service completes an undercover operation that leads to the

several BCCI officials for laundering drug money (who are convicted in

March, 1989:
of BCCI,
American

Manhattan District Attorney Robert Morgenthau begins a wide-ranging probe

suspecting money laundering, but focusing on the real ownership of First
Bank. Price Waterhouse intensified review of BCCI's activities.

April, 1990: Bank of England reached an agreement with BCCI, Abu Dhabi, and Price
Waterhouse to keep BCCI
from collapsing. Under the agreement, Abu Dhabi agreed to
guarantee BCCI's losses and Price
Waterhouse agreed to certify BCCI's books.
.

May, 1990:
Regardies, a business magazine, publishes a story titled "Who
Really Owns First
American Bank?"
January, 1991:
First American.

Federal Reserve begins an official probe into ownership of

March, 1991:
American.

BCCI admits that it has an illegal 25% stake in First

June, 1991:
evidence of

Price Waterhouse UK informs Bank of England that it has found

widespread fraud at BCCI.

July 1991:
BCCI crumbles. BCCI offices in the UK, US, France, Spain,
Switzerland,
Luxembourg and the Cayman Islands were seized and
activities frozen.

ould The BCCI Affair Have Been Prevented?

In retrospect
1. Problems With Auditors
.

BCCI used a two auditor system for 15 years (Price Waterhouse UK and Ernst & Whinney). Neither had
the right to audit all of BCCI

Auditors not independent--BCCI provided Price Waterhouse with loans, financial benefits, and sexual
favors

2.

Actions Recommended by the The BCCI Affair: A Report to the Committee on Foreign Relations
United States Senate by Senator John Kerry and Senator Hank Brown December 1992

US develop a more aggressive and coordinated approach to international financial crime.

CIA and State Department upgrade the tracking of foreign financial institutions

Foreign auditors whose certifications are used by institutions doing business in the US agree to submit
themselves to US laws.

The Aftermath
Lawsuits and Liquidation
The Provisional Liquidators, Deloitte & Touche, were appointed on 5 July 1991. The winding up order
was made in the High Court in England on 14 January 1992.
In addition to BCCI SA, other group companies are also in liquidation. The main companies are BCCI
Holdings based in Luxembourg and BCCI Overseas based in the Cayman Islands.
The intermingling of the affairs of the companies led to the arrangement to pool the assets for the
benefit of all the creditors. As a result a Board of Liquidators regularly meet to decide on a common
course of action for the benefit of all the creditors in the group.
The Liquidators have two fundamental objectives to maximize recoveries and to pay dividends to
admitted creditors as quickly as possible.
Global realizations to 15 January 2002 were US$7.5 billion..

The most significant realizations have been achieved through negotiation.

Examples include the Majority Shareholder Agreement that has realized some
US$2 billion and agreements with the US authorities that have realized some
US$1 billion.
The Liquidators have instigated legal claims against those who failed to repay
loans, committed fraud against the Bank or failed to discharge their professional
duties correctly. Significant judgments and realizations have been achieved.
Many actions are still being progressed through the relevant Court and will take a
number of years to bring to a conclusion.
There are in excess of 70,000 creditors with admitted or in progress claims with a
value of $9 billion.
A total of 60% of the value of admitted claims has been paid to the creditors

THE END