The most scandalous revelation about the Bank of Credit and Commerce International (BCCI) was the enormous world demand for its services. Space does not allow a listing of all the terrorists, drug lords, dictators, greedy rulers, arms traffickers, smugglers and spy agencies reportedly lined up for its confidential attention.
The floating world bank scandal, broken open in Luxembourg and Britain, came to rest in the United States with the indictment of the bank and its founders by a New York grand jury for defrauding depositors of $5 billion and other irregularities. Simultaneously, the Federal Reserve Board sued it for $200 million for breaking U.S. banking laws. Investigations continue into its secret ownership of First American Bankshares, which operates banks in Maryland, Virginia, the District of Columbia, Georgia, New York, Florida and Tennessee.
An impressive international coordination of regulators organized by the Bank of England shut BCCI on July 5 in most of the 69 countries where it operated. This is an enormous hardship to innocent depositors, including humanitarian agencies and Pakistani immigrants who trusted its Third World rhetoric. This bank borrowed from the poor and lent on no collateral to the rich.
BCCI was founded in 1972 in Luxembourg by a group led by Agha Hasan Abedi, now indicted, an entrepreneurial Pakistani banker evading nationalization at home. Its headquarters were there and the Cayman Islands, but its real base was London. A majority of ownership passed to the oil-rich ruler of Abu Dhabi, who on current understanding looms as a victim. At its largest, BCCI claimed $20 billion in assets, which authorities are now trying to locate.
Britain, without bank examiners to fall back on, drafted the bank's private auditors, Price Waterhouse, into sharing information with the regulating authority and blowing the whistle. The bank's chief operating officer until last October, Swaleh Naqvi, stands indicted in New York along with his boss. Alleged bribes, looting and other deceptions are being investigated round the world. While some in Britain and the United States are congratulating themselves and others are pointing fingers, the affair produces profound disquiet.
Just as each country needs to regulate banking to instill confidence in business, so in an era of electronic worldwide banking must the world. This was, in the words of Manhattan District Attorney Robert M. Morgenthau, "the largest bank fraud in world financial history." If, as Bank of England Governor Robin Leigh-Pemberton said, "the culture of the bank is criminal," then the world needed a mechanism to bring it to a halt before now.
Since government does not transcend national boundaries, creative cooperation is needed to devise bank regulation to do so. As the various investigations start to shed light on BCCI transactions, the nature of the problem will come clear. The security of world commerce requires solutions.