Shutting the doors of BCCI did not prevent $13 billion going missing—not that any of the monies went to the bank’s staff or small investors, the latter queueing fruitlessly to retrieve their deposits from BCCI branches. There are no answers as to where the missing monies went, although there are hints that some of the bank’s bigger clients received larger than usual remunerations in the run-up to the collapse.
An investigation by the French intelligence service found that one Osama bin Laden was a BCCI customer. It is within the bounds of possibility that bin Laden was among those who benefited in the last days of the BCCI criminal empire.
J. Beaty and S. C. Gwyne,
Senator John Kerry and Senator Hank Brown,
Peter Truell and Larry Gurwin,
DOCUMENT:
Report of Senator John Kerry on “The Bcci Affair” to the Committee on Foreign Relations, United States Senate, in December 1992
BCCI’s unique criminal structure—an elaborate corporate spider-web with BCCI’s founder, Agha Hasan Abedi, and his assistant, Swaleh Naqvi, in the middle—was an essential component of its spectacular growth, and a guarantee of its eventual collapse. 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. Unlike any ordinary bank, BCCI was from its earliest days made up of multiplying layers of entities, related to one another through an impenetrable series of holding companies, affiliates, subsidiaries, banks-within-banks, insider dealings and nominee relationships. By fracturing corporate structure, record keeping, regulatory review, and audits, the complex BCCI family of entities created by Abedi was able to evade ordinary legal restrictions on the movement of capital and goods as a matter of daily practice and routine. In creating BCCI as a vehicle fundamentally free of government control, Abedi developed in BCCI an ideal mechanism for facilitating illicit activity by others, including such activity by officials of many of the governments whose laws BCCI was breaking.
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Among BCCI’s principal mechanisms for committing crimes were shell corporations, bank confidentiality and secrecy havens, layering of corporate structure, front-men and nominees, back-to-back financial documentation among BCCI controlled entities, kick-backs and bribes, intimidation of witnesses, and retention of well-placed insiders to discourage governmental action.
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However daunting the task of explicating the full extent of BCCI’s criminality, it is essential to recognize that at core, BCCI was not a bank which made an adequate return on investment through lending out depositors’ funds like other banks, but a “Ponzi scheme,” which used new depositors’ funds to pay current expenses and to repay earlier depositors, creating a pyramid of mounting obligations that ultimately and inevitably would bring about BCCI’s collapse.
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From the beginning, BCCI President Abedi conceived of BCCI as a machine with two driving mechanisms— asset growth and faith. The latter was essential to prevent a day of reckoning when depositors and creditors alike would cause a run on the bank. The former was necessary to sustain the latter through bad times. Together, they worked to sustain the illusion that BCCI was solvent, when in fact, it is unlikely BCCI was ever solvent.
On 18 December 1991, in an agreement with the Justice Department and New York District Attorney, BCCI’s liquidators pleaded guilty to having engaged in a criminal conspiracy through financial fraud, and thereby constituting a Racketeering Influenced and Corrupt Organization (RICO), whose entire assets, legitimate and illegitimate, were subject to confiscation by the government. Specific crimes admitted to by BCCI’s liquidators in the agreement included:
Seeking deposits of drug proceeds and laundering drug money
Seeking deposits from persons attempt to evade US income taxes
Using “straws” and nominees to acquire control of US financial institutions
Lying to regulators and falsifying regulatory documents
Creating false bank records and engaging in sham transactions to deceive regulators.
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The New York District Attorney found that among the major actions taken by BCCI to carry out its fraud were:
Employing the ruling families of a number of Middle Eastern states as nominees for BCCI, who pretended to be at risk in BCCI but who were in fact guaranteed to be held harmless by BCCI for any actual losses.
Using bank secrecy havens including Luxembourg and the Cayman Islands to avoid regulation on a consolidated basis by any single regulator of BCCI, and thereby to permit BCCI to transfer assets and liabilities from bank to bank as needed to conceal BCCI’s true economic status.
Paying bribes and kickbacks to agents of other banking and financial institutions, thereby avoiding the scrutiny of regulators.
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From the time of BCCI’s indictment on drug money-laundering charges in Tampa, Florida in October, 1988, there was little doubt to anyone looking at the facts that BCCI had been used to launder drug money.
The Customs agents working on the “C–Chase” case against BCCI moved millions of dollars in US currency, representing the proceeds of cocaine sales, through BCCI Panama, BCCI Luxembourg, and LOANS Switzerland as a result of the knowing participation of several BCCI officials.
As Robert Mazur, the Customs agent in Tampa who selected BCCI as the target of the Customs money- laundering sting testified, BCCI bank executives volunteered methods to enhance and improve his techniques for money-laundering, and shortly before the sting ended the operation, offered to introduce Mazur to other potential “cash” customers for money-laundering services from Bogota, Colombia.
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Given BCCI’s size and dispersion, money-laundering at BCCI would have been inevitable under any circumstances. Given BCCI’s never ending quest for assets and its management’s attitude towards laws, it was ubiquitous. As Akbar Bilgrami explained, Abedi was constantly telling BCCI employees that the only thing that mattered was the generation of assets. When Bilgrami was in Colombia in the mid-1980s
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The degree of BCCI-US’s reliance on money-laundering as a principal business was demonstrated by what happened when BCCI put into place a “compliance program” as part of its January 1990 plea agreement resolving the Tampa money-laundering case: business dropped noticeably, especially referrals from other BCCI locations, because neither BCCI nor its customers wanted to provide details about the customers’ businesses.
BCCI’s clients for money-laundering included Panamanian General Manuel Noriega, for whom it managed some $23 million of criminal proceeds out of its London branches; Pablo Escobar, of the Medellin cartel; Rodriguez Gacha, of the Medellin cartel; and several members of the Ochoa family.
