BCCI was a bank started in 1972 that was used by the CIA and helped fund groups like Osama bin Laden. It engaged in money laundering and catered to criminal clients. It had over $20 billion in assets making it one of the largest private banks. However, it used complex structures across 70 countries to avoid regulation. This included unusual accounting practices designed to frustrate investigators. It was eventually shut down in 1991 after audits revealed its criminal activities.
2. Background
Started in 1972 by Agha Hasan Abedi
and Sheikh Zayed bin Sultan al
Nahyan (UAE)
Used by CIA to funnel $ to Afghanistan
Helped Osama bin Laden, Saddam
Hussein, even George W. Bush
3. Opportunity for Moral Hazard
Financially motivated, but also
religiously motivated
Government regulation
Pakistan's state
◦ All banking nationalized
Giant Ponzi Scheme
4. BCCI’s Financial Structure or:
How I learned to stop probing and love
decentralization
Money laundering, bribery
Catered to Saddam Hussein, Noriega,
Columbian drug dealers
Black market:
◦ Guns, and drugs, and sex slaves oh my!
Assets of more than $20 Billion,
making it the 7th largest private bank
by assets
5. How to avoid Gov’t Regulation 101
# of managers, all over the world reported
directly to 1 person.
Holding companies, off-shore banking,
branches and subsidiaries in 70 countries
Accounting done longhand on paper ledgers
written in Pakistani’s Urdu
Unusual Accounting system: PWC for foreign,
and Ernest & Young for its 2 holdings at
headquarters. Constant revision of financials
Frustrate investigators/auditors
6. Where BCCI screw up
BCCI wants to expand into US market
using “straws”
Raises eyebrows
Audited by Price Waterhouse and
Ernst & Young
BCCI shutdown after audits
75% of creditors reimbursed, but
estimated $9.5-15 billion stolen
Hinweis der Redaktion
Started by wealthy prominent men in Pakistan. Equivalent of royalty.
The Arabs' interest in the bank was more than financial. A classified CIA memo on BCCI in the mid-1980s said that "its principal shareholders are among the power elite of the Middle East, including the rulers of Dubai and the United Arab Emirates, and several influential Saudi Arabians. They are less interested in profitability than in promoting the Muslim cause."
So complex that PWH reported that $10 billion, half its assets, was missing in the financial statement