Bank of Credit and Commerce International (BCCI)

BCCI was the 7th largest private bank in the world, with assets of $20 Billion. In 1991, it was shut down in the biggest coordinated regulatory action in history. It was famously dubbed the "Bank of Crooks and Criminals International".

Timeline of the Global Fraud

• 1972: Foundation - BCCI Founded by Agha Hasan Abedi in Pakistan/Luxembourg.
• 1980s: Expansion - Expands to 78 countries. Becomes the bank of choice for smugglers and the CIA.
• 1988: Florida Sting - First cracks appear. BCCI indicted in Florida for laundering drug money.
• 1990: Price Waterhouse Audit - Auditors discover huge unexplained losses. The 'Sandwich' structure is revealed.
• July 5, 1991: The Shutdown - Regulators in 7 countries raid and shut down BCCI simultaneously.

The "Regulatory Sandwich"

BCCI used a brilliant but evil structure to avoid regulation:

• Operational HQ: London (but not regulated by Bank of England as a British bank).
• Legal HQ 1: Luxembourg (Weak regulation).
• Legal HQ 2: Cayman Islands (Tax Haven).
• Result: No single regulator had the full picture. When London asked questions, they pointed to Luxembourg. When Luxembourg asked, they pointed to Cayman. This corresponds to Regulatory Arbitrage.

The Criminal Clientele

BCCI was not just a bank; it was a criminal service provider.

• CIA: Used it to funnel money to Afghan rebels.
• Pablo Escobar: Used it to wash cocaine money.
• Abu Nidal: Terrorist organization held accounts there.

Lessons Learned

1. Consolidated Supervision: A bank must have a lead regulator responsible for its global operations.
2. Cross-Border Cooperation: College of Supervisors established to share info between nations.