Bank of Credit and Commerce International

Bank of Credit and Commerce International
Bank of Credit and Commerce International

Known as the “Outlaw Bank,” the Bank of Credit and Commerce International (BCCI) was established in the Middle East in 1972 as the Third World’s first multinational bank after failing to acquire the Chelsea National Bank in New York. Some contended that the British were behind the bank as part of their “long-standing scheme” (according to conspiracy researcher Sherman Skolnick) to overthrow the U.S. government.

Others viewed with suspicion the bank’s Third World connections to Middle Eastern investors—it was founded by Agha Hasa Abedi, a Pakistani Muslim Shiite-turned-Sufi financial advisor, and dealt extensively with renegade Muslim governments. The bank’s activities were made all the more suspicious by the close connection of BCCI to Washington insiders such as former Carter administration official Bert Lance.

BCCI was more than a bank. As the authors of The Outlaw Bank observed, BCCI “possessed its very own diplomatic corps, intelligence network, and private army, its own shipping and commodities trading companies” (Beaty and Gwynne).

BCCI’s size and scope of operations threatened to make it a heavyweight even among existing multinational corporations. Unlike General Motors or Mitsubishi—both technically multinational corporations—BCCI had no national allegiance and the managers operated as though they were free from any constraints of national sovereignty.

Abedi, who was trained as a banker, was allied with Zayed bin Sultan al-Nahayan of the United Arab Emirates, who funneled money into Abedi’s Pakistani bank. In the early 1970s, with Zayed’s support, Abedi met with U.S bankers from the Bank of America to present his concept for a Third World bank with offices in the Middle East, London, and Luxembourg.

Bloated with oil profits, Middle Eastern governments were looking for places to deposit their “petrodollars” that would be safe and generate a return. Forming the Bank of Credit and Commerce International in 1972, Abedi used numerous front men to attempt to purchase Chelsea National Bank in New York before regulators stopped the acquisition. BCCI then opened a Cayman Islands subsidiary in 1976.

The following year Abedi first met T. Bertram “Bert” Lance, the budget director in Jimmy Carter’s administration. Lance had been the chief executive officer of National Bank of Georgia—the largest lender to Carter’s Georgia peanut business—and Lance had been indicted, then found innocent, of several financial improprieties while at National Bank.

Abedi and Lance developed a relationship in which Lance served as an “advisor” to Abedi, specifically when it came to acquiring Financial General Bankshares, a Washington bankholding company. Lance mentioned that his own National Bank of Georgia was up for sale, and Abedi orchestrated a purchase for the bank (and Lance’s 12 percent interest in it) through a front man, Ghaith Pharaon, in 1978. The new owners also acquired Clark Clifford, former secretary of defense, as BCCI’s lawyer. BCCI was already skirting legality in its surface operations.

Below the surface, the bank was financing arms trade, drug smuggling, and a host of other illegal activities, laundering the money through front operations. BCCI agents were involved in bribery, fraud, grand larceny, and tax evasion. It illegally acquired First American Bank of New York through front agents in 1982, and Independence Bank of Encino (California) in 1985, concealing the ownership of the subsidiaries from the government.

Regulators raised concerns that Abedi or other unnamed individuals were in fact issuing all the orders for BCCI’s U.S. subsidiaries. In 1985 the CIA issued a report warning that BCCI had obtained control of First American, a point that was finally admitted in public in 1988.

The scope of BCCI’s illegal activities, and its apparent flouting of U.S. banking law, should have provoked a response from either the executive or legislative branches, but no such response came. Finally, in 1989, the New York Police Department launched an investigation of BCCI.

Trials and audits produced evidence that BCCI was involved in money laundering, was in debt nearly $2 billion, and that the key stockholders were all Middle Eastern investors, including Sheikh Zayed. Juries in several states convicted BCCI officials on a variety of charges, and Treasury and FBI agents seized BCCI offices and assets.

The Federal Reserve authorities overlooked or ignored BCCI activities until other parts of the justice system had cracked down, leading to further charges of “insider” favoritism. In 1991, a coordinated offensive by regulators in several countries shut down BCCI operations and froze more than $20 billion in BCCI funds, accounting for 75 percent of the total.

U.S. regulators from the Federal Reserve and the Treasury required BCCI to divest itself of any U.S. banks purchased illegally, and later that year the Federal Reserve fined BCCI $200 million. BCCI principal officers were arrested and convicted of money laundering, bribery, larceny, and other charges.

BCCI had engaged in a wide range of illegal activities, but it had also provided a financial front for sensitive financial and weapons transfers that the government wanted to keep off the record. The bank assisted Adnan Kashoggi in financing the sale of arms to Iran as part of the Iran-Contra scandal.

It also became involved in the Banco Nazionale del Lavaro in Atlanta, which loaned Iraq’s Saddam Hussein some $600 million. Hussein used the money, as well as funds from agricultural loans, to acquire weapons. In 1990, Hussein invaded Kuwait and had to be driven out in the Gulf War.

Both the CIA and the Justice Department accused the other of failing sufficiently to investigate the bank. In fact, the Justice Department did not realize the magnitude of the criminal activity with which it was dealing, and the CIA had an interest in keeping some of its operations quiet.

In 1991, BCCI was effectively bankrupt, although neither Price Waterhouse, the accounting firm that audited BCCI, nor the government of Abu Dhabi, made public the bank’s troubles, costing depositors millions of dollars. The following year, Congress completed its investigation of how BCCI went under, concluding that the failure to appreciate the bank’s criminal activities was attributed to “gaps” in the regulations and to an army of well-financed lawyers.

Even though BCCI has been out of business, conspiracy theorists such as Sherman Skolnick contend that it continues to operate through shadow organizations or through established institutions such as the Bank of England. BCCI’s extensive clientele, its vast sums of unregulated money, and its insider U.S. political partners made it a natural for conspiracy theories of all types.