Tentacles of seized 'Bank of Crooks and Criminals' reached around the world INTERNATIONAL BANK SCANDAL

August 04, 1991|By James Bates | James Bates,Los Angeles Times Thomas Easton of The Sun's New York Bureau contributed to this story.

Question: What is BCCI?

Answer: BCCI stands for Bank of Credit and Commerce International, although since it became embroiled in scandal, wags have renamed it "Bank of Crooks and Criminals International."

Over the years, BCCI enjoyed acclaim in developing nations for its practice of extending credit in areas Western banks avoided. It was reputed to be more sympathetic to Third World economic problems than what are often seen in developing nations as the indifferent financial institutions of the industrialized world. It developed close relationships to central banks in developing countries, whose officials often deposited funds in BCCI accounts.

But it also has been linked for years to criminal enterprises -- tied, for example, to drug-related money-laundering activities, including some involving Manuel Antonio Noriega, the former Panamanian dictator. In 1990, two of BCCI's units pleaded guilty federal court in Tampa, Fla., to money-laundering. Later that year, six current and former BCCI employees were convicted of conspiring to launder $32 million in cocaine money.

On July 5, banking regulators from around the world teamed up to shut down most BCCI operations, alleging widespread fraud.

What is unique about BCCI is not its size but its reach. BCCI's operations and influence stretch throughout the world to about 70 countries and 1 million depositors. Its principal operations are based in Luxembourg and the Cayman Islands, two areas with some of the world's most lax banking regulations.

With $20 billion in assets, the bank is not especially big by world standards.

Q. What is BCCI accused of?

A. BCCI's seizure was prompted by the alleged disappearance of billions of dollars. Some investigators estimate that associated losses could be as high as $15 billion, which would make it by far history's biggest banking scandal.

Where all of that money went is still a mystery. The seizure followed an audit by the accounting firm Price Waterhouse. The audit showed, among other things, that the bank failed to record deposits, apparently in an effort to camouflage huge losses on bad loans and investments. In addition, British authorities allege that BCCI assisted people in dodging taxes by falsifying transaction records.

BCCI is said to have been the favorite bank of Iraq's Saddam Hussein and Palestinian terrorist Abu Nidal. Also, allegations are surfacing that the CIA regularly used the bank as part of such covert activities as assistance to rebels in Afghanistan and the "contras" in Nicaragua.

There are two important legal actions pending against BCCI in the United States. The Federal Reserve Board says BCCI skirted federal regulators by not disclosing its interest when it purchased U.S. banks. A more far-reaching case, filed in New York by the local district attorney, contends BCCI paid bribes to central bankers in Peru, falsified financial records on foreign currency transactions to abet laundering of drug money, and committed grand larceny in connection with American Express Bank Ltd. The grand larceny charge stems from a $30 million deposit by American Express Bank into BCCI that was on BCCI's books July 5, when it was closed by the Bank of England and regulators from other nations. The deposit was obtained, according to the New York indictment, because BCCI falsely represented its true financial condition.

Q. Which U.S. banks or financial firms are involved?

A. Authorities have alleged that two U.S. banks are secretly owned by BCCI: First American Bankshares Inc. in Washington, D.C., and Los Angeles' Independence Bank. BCCI is said to have used a front man, Saudi financier Ghaith R. Pharaon, to buy National Bank of Georgia. BCCI also allegedly hid behind front men when purchasing control of First American, which has an affiliate in Maryland, and shares in Centrust Savings Bank in Miami. These alleged ruses were used because officials would never have approved an investment by scandal-ridden BCCI. Federal Reserve officials have ordered BCCI to sell its secret interests -- a process that has been delayed by the bank's seizure.

The Fed is seeking $200 million from BCCI, alleging that it broke U.S. banking laws by secretly buying the shares in First American, National Bank of Georgia (later acquired by First American) and Centrust.

Q. Who are the leading figures in the case? What did they allegedly do?

A. Agha Hasan Abedi founded the bank in 1972 and ran it for years. He is now retired and living in his native Pakistan.

Swaleh Naqvi, the bank's chief operating officer until October 1990, is now living in Abu Dhabi.

Sheik Zayed ibn Sultan al Nahayan, the ruler of oil-rich Abu Dhabi in the Persian Gulf region, and his government purchased a controlling interest in BCCI last year and now face billions of dollars in claims. The sheik is under pressure to use his country's oil wealth to make good on depositors' losses.

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