Introduction:

On July 5, 1991, an incident that has been described as the biggest bank fraud in
history came to a head when regulators in seven countries raided and took control of
branch offices of the Bank of Credit and Commerce International (BCCI). Monetary
losses from the scandal were huge, with estimates ranging from $10 billion to $17 billion
though many billions have since been recovered for creditors by the banks liquidators,
Deloitte & Touche.

The scandal had been developing for nearly two decades and encompassed an intricate
international web of financial institutions and shell companies that had escaped full
regulation. BCCIs activities, and those of some of its officers, included dubious lending,
fraudulent record-keeping, rogue trading, flouting of bank ownership regulations and
money laundering in addition to legitimate banking activities. The banks structure and
deal making was so complex that, a decade after the institution was liquidated, its
activities are still not completely understood.

One way to think of the BCCI saga is as an attempt to create the polar opposite of a firm
with integrated risk management practices. In this case, certain senior bank personnel
and interested parties did not simply overlook risks, but manipulated gaps in the banks
risk management structure and between its subsidiaries, to serve various purposes.
This put at a disadvantage other stakeholders, such as the million or so small
depositors around the world and certain institutional depositors attracted by BCCIs
relatively high rates, who provided much of the banks funding. Meanwhile, other bank
officers had little understanding of the banks structure and overall financial position, and
were encouraged not to question bank practices, or the reason for the flow of funds
between bank entities.

Lessons Learned:
- The critical role of senior management and key investors in establishing an honest,
open and prudent bank culture;
- The need for powerful executives and backers of institutions to be controlled within a
secure enterprise-wide corporate governance structure, if the interests of other
stakeholders, such as deposit holders, are to be safeguarded;
- The need for independent and unified regulation and auditing of complex financial
conglomerates;
- The danger that attempts to preserve confidence in a bank, even when well-
intentioned, will lead to further cover-ups inside and outside the bank;
- The oldest lesson of all: the ease with which massive bad loans and trading losses can
be covered up in banks by extending further credit, failing to record deposits, and
juggling accounts.
The Story:
Agha Hasan Abedi, a Pakistani banker with Arab backing, founded the Bank of
Credit and Commerce International in 1972. The institution was chartered in
Luxembourg, but its treasury and other key functions were based in the Cayman Islands
and in London before decamping to Abu Dhabi in 1990. Its branches and subsidiaries in
70 countries were held together by a complex structure of holding companies, cross-
holdings and nominee owners. BCCIs international nature helped the company avoid a
large amount of regulation because for most of its history no single regulator or audit
team had full jurisdiction over it.

Although institutions such as the CIA and the Bank of England reportedly had some
knowledge of BCCIs activities before the scandal broke, regulators worldwide including
a special college of regulators set up to oversee the institution in 1987 proved unable to
take early and decisive action against the bank. Regulation was made difficult by
inadequate communication among agencies, and by the high-level government
connections that BCCIs leaders cultivated. Although they may not have endorsed the
banks activities, various influential figures in the US and around the world overlooked
signs that could have exposed the scandal before 1991, and lent the institution a veneer
of respectability.

One such sign was the banks involvement in money laundering and the financing of
arms trafficking. BCCIs presence in the Cayman Islands, and its many offices all around
the world, made it a useful route for tainted funds. Clients included such figures as
former Panamanian dictator Manuel Noriega, as well as individuals who were involved
in various drug and crime cartels. American enforcement officials had uncovered
evidence of these transactions by 1983, but did not act on them until 1988. At that point,
the US Customs Service completed an undercover operation that led to the arrest of
several BCCI figures, who were convicted of money laundering on July 29, 1990. The
bank itself pleaded guilty to the laundering charge and was fined $14 million.

The banks international web began to unravel in 1990 when Regardies, a Washington-
based business magazine, published a story that questioned the BCCI links of the
owners of a significant US bank, First American. The Federal Reserve began an official
probe into the alleged connection between BCCI and First American. In March 1991,
BCCI admitted that it had acquired a 25 per cent stake in First American, without the
approval of regulators. The Fed then ordered BCCI to sell the shares in question.
Investigations continued in the US and, separately, in London. In June, Price
Waterhouse, a principal BCCI auditor, informed the Bank of England that it had found
evidence of widespread fraud and account juggling in BCCIs operations. The auditors
came to believe that, despite its pace of growth, the bank might never have made a
genuine profit in the whole of its 19-year existence.

Throughout its history, BCCI had made large loans to companies and individuals
without properly securing them. The loans represented massive concentrations of credit
risk, but were often not properly documented or monitored. When these loans went bad,
the bank had no legal recourse, and was forced to absorb the losses. This strategy,
which ran counter to common sense and all principles of good lending, racked up huge
losses for BCCI. It covered up this problem by taking in new deposits and not recording
these straightforwardly on its books, and by otherwise creating a matrix of false
accounts that hid the losses for years.
Another way BCCI lost money was through huge losses incurred by its treasury
department, particularly in the early 1980s though these losses may themselves have
been a way of disguising other losses and misdoings. BCCI also reportedly lost
hundreds of millions of dollars through a financial services trading company that it set
up.

Ironically, BCCI itself lost huge amounts of money in the series of illegal US bank
acquisitions and from the improperly secured loans underpinning them that led to its
investigation and closure in 1991.

BCCI's American acquisitions:

The regulatory probe that exposed BCCIs losses was brought about by the banks illegal
control of several American financial institutions. The largest, First American, was based
in Washington, DC, and was ostensibly run for 12 years by two high-profile Washington
insiders, former US Secretary of Defense Clark Clifford and his law partner Robert
Altman.

These two men became involved with BCCI in 1978, when they were hired as the banks
US lawyers. One year earlier, BCCI had set its sights on Financial General Bankshares,
the company that would later become First American. A takeover group that included
Bert Lance (a banker from Georgia, better known as the Carter administrations budget
director) and various Middle Eastern shareholders was formed in 1977. By 1978, it had
purchased 25 per cent of the available shares in Financial General. At that point, the
SEC charged the group with failing to disclose ownership information, but did not stop
the takeover.

When the takeover group made a $70 million bid for Financial General, the Federal
Reserve Board initially rejected it. This hurdle did not stop BCCI and the investors
connected to it, however, and in 1980, Financial General accepted a takeover bid of
$180 million. Approval for the deal was delayed until 1982, while regulators attempted to
verify that BCCI would not be controlling the US bank. Clifford and Altman assured the
authorities that they would be in charge of the purchased institution, and the deal was
allowed. The two lawyers became the top executives of the Washington bank, which
was renamed First American Bankshares. Eventually, when BCCIs involvement with the
bank was publicised, First American lost a large amount of business and, in 1993, part
of it was sold to First Union Corp.

Clifford and Altman maintained that they had acted in good faith, and that BCCI had not
gained effective control over the US bank. In 1993, Altman was acquitted of charges of
bank fraud in a New York state court, while charges against Clifford were set aside due
to his ill health. In 1998, not long before Clifford died, both men reached a $5 million
settlement with the Federal Reserve Board without admitting any of the allegations.

BCCIs involvement in US banking was not limited to Washington. In 1987, First

American made an all-cash offer for the National Bank of Georgia that, the Federal
Reserve later alleged, was simply a way for BCCI to secure covert investments it had
made a decade or so earlier. Like First American, National Bank of Georgia was sold to
South Trust Corp after its BCCI connection was revealed. Other institutions fatally
embroiled in BCCIs complex deals and shadowy investments included the
Independence Bank, Encino, California and CenTrust, an already troubled Miami-based
thrift.

The Aftermath:
When BCCIs problems were uncovered in the 1991 probe, regulators in seven countries
moved quickly to take over the banks branches. On July 5, offices in the UK, US,
France, Spain, Switzerland, Luxembourg and the Cayman Islands were seized, and the
banks business activities were frozen. BCCIs assets were ultimately liquidated, and a
pool was established to reimburse depositors who had lost their funds when the bank
shut down.

Despite various investigations and reports since 1991, its difficult to sum up the cause
of the BCCI scandal in any simple way. Lax corporate governance, manipulation by
backers and bank officers with their own personal agendas, general fraud and failure of
fundamental risk management structures at the highest level of the bank can be
considered the primary engines driving the losses to the banks stakeholders. More
specifically, the banks untenable loan and acquisitions strategies, poor treasury and
record-keeping practices, and its habit of hiding the massive losses that resulted, led to
its downfall. BCCIs numerous regulatory violations and legal liabilities, and its
negligence in protecting the interests of depositors who were not wealthy or well
connected, hardly need pointing out.

On a brighter note, the bank officers and liquidators appointed by the courts after the
scandal have used settlements, forfeitures and fines to recover significant monies for
stakeholders particularly small depositors damaged by the banks failure. In December
1991, BCCI made the first of many large contributions to the depositors restitution pool,
when it pleaded guilty to criminal charges and agreed to forfeit $550 million. In 1994, the
government of Abu Dhabi, which took over BCCI after the scandal broke, agreed to pay
$1.9 billion to the depositors pool. Meanwhile, from 1995, various of BCCIs wealthy
Middle Eastern backers who had been sued or fined for their involvement in the scandal
began to reach settlements worth hundreds of millions of dollars.

In the most recent twist in the tale, in March 2001, BCCIs liquidators were granted leave
by the House of Lords to sue one of BCCIs principal regulators, the Bank of England,for
up to 1 billion for failing to monitor BCCI properly. The Bank says it plans to defend the
action with the utmost vigour. BCCI, it seems, will not rest in peace.

Timeline: Thirty years of trouble

1972: BCCI is founded.

1977-78: Middle Eastern investors associated with BCCI take control of First American
and National Bank of Georgia, while telling regulators the banks will not be controlled by
BCCI.

Early 1980s: BCCI treasury operations lose big money through risky trading.

1988-90: BCCI and some of its staff are investigated and convicted of money
laundering.

1990: Article in Regardies prompts renewed investigation of whether BCCI controls First
American.

June 1991: Price Waterhouses Sandstorm report for UK regulators details serious fraud
at BCCI

July 1991: Regulators take control of BCCI offices in key countries.

Midlate 1990s: Key Middle Eastern figures in the BCCI saga and Abu Dhabi agree to
pay large sums in restitution.

March 2001: Liquidators seek damages from the Bank of England for its role in
regulating BCCI.
Student leader, Trotskyite, historian, journalist and playwright manqué, Tariq Ali reached
iconic status for his raucous, rabble-rousing anti-Vietnam protests. We, who much to the
mocking mirth of our friends, marched in solidarity into Grosvenor Square, looked on with no
small measure of pride, as this handsome Pakistani took centre stage. That was the year of the
protests in Chicago at the Democratic Convention and of the birth of the famous Chicago Eight.
Throughout the intervening years, Tariq Ali has produced a shelf load of historical fiction,
essays, TV films and is a much sought-after speaker. In all this time he has maintained his
radicalism, even if it is inevitably mellowed and measured.

          He has recently published this indictment of the late Agha Hasan Abedi and his creation,
the Bank of Credit and Commerce International (BCCI). Tariq Ali has chosen a subject that in
this country resurrects distressing memories and over which clouds of confusion and concern
remain. This selection is all the more perplexing in that there is no significant current interest in
the history of BCCI - today's entry-level collegiate was hardly born the year the bank was closed
and the acronym is more likely to conjure up the Indian cricket authority rather than this bank. In
any case the central character passed away some time ago. So why travel back down this well-
worn road?

          BCCI was set up in 1972 by Agha Hasan Abedi and a close-knit group of confidantes,
after the nationalisation of his previous venture, the United Bank. The funding came primarily
from several Arab emirates, the staff from UBL and his international acceptability from a 25%
partnership with the global giant, Bank of America (BoA). The Luxembourg Banking
Commission made it clear that the license was being given to BoA.

          According to Swaleh Naqvi, Abedi's trusted and loyal No.2 (and confirmed in interviews
with many key players, both loyal and dissidents), they envisioned a truly global organisation
fuelled by emerging petrodollars - "a World Bank, a global bank for the Third World." It was to
be achieved by a meteoric expansion into the developing world and through the introduction of
real customer service concepts in markets dominated by complacent postcolonial near-
monopolies. The bank was to be managed by bankers, mainly from Pakistan, charged with the
culture and ethos delineated by Abedi.

           Back in the seventies, in those bleak days of misapplied socialism, the career path for an
ambitious Pakistani led only to state-managed enterprises, entailing vigorous sifarish and an
introduction to a culture of licenses, nepotism and sycophancy. Foreign investment dwindled to a
trickle and the opportunity for fulfilling employment in multinationals or even progressive local
outfits was scarce. BCCI, with its shiny chrome and glass interiors meticulously created by a
Lebanese designer, and young men in smart suits, oozing enviable team spirit, culled from the
best and the brightest.

          From its bases in London and the Middle East, BCCI expanded into Africa in the seventies
and further afield in Asia by the eighties. By 1980, BCCI had 150 branches in 46 countries and
set about expanding into the Americas, North, Central and South. The US was to prove to be that
bridge too far.
          In the latter half of the eighties, terminal illness struck- both literally and figuratively. Its
founder suffered a debilitating heart attack and in the US, authorities initiated a multiple attack.
The bank was vilified as the greatest fraud of the century, as a shopping centre for criminals, the
merchants of sleaze and corruption, a haven for drug money, a pimp for potentates and a criminal
enterprise violating US banking regulations. Opportunistic journalists, of which Tariq Ali was
the most prominent, clambered on to the bandwagon. In 1981, he wrote three unsigned articles
published by the New Statesman, which are appended in this TV script. Then through a film The
BCCI Story in 1991 for Channel 4 and now, over a quarter of a century later, with the
publication of a long-forgotten TV script buried in his filing cabinet.

          What then is the motive? Drama or possibly vendetta? If conceived as a drama, even with
the demands of sound-bite sensationalism, perhaps Tariq Ali should study the craft of the writers
of such excellent TV dramas as Inspector Morse or House of Cards. In the early part of the last
century, William Archer in his seminal work, Playmaking, lays down two immutable rules for
any dramatic work. Quoting Aristotle, he says a play should have a beginning, a middle and an
end, a fundamental requirement that Tariq Ali seems to avoid as one is hard put to fathom a story
or a theme. Secondly, Archer advises, "The story which is independent of character - which can
be carried through by a given number of ready-made puppets … is essentially a trivial thing."
The only person in this story, however, slanderously portrayed, and who inspires attention is the
character of Abedi himself. The rest are 'ready made puppets' and the story is essentially 'a trivial
thing.'

          Tariq Ali does not shroud Abedi alone with evil but, unable to restrain his own politics,
imputes base corruption to officials of the Bank of England and collusion by a number of official
agencies to subvert the investigation of the bank. On the soft targets of Pakistanis and Arabs, it is
open season.

           The story covers the discovery by a journalist, Amanda (the could-be central protagonist),
that the CIA was instrumental in the formation of the bank, supported the bank's involvement in
drug-trafficking and money-laundering, which was financed Abu Nidal, the world's No.1
terrorist - and then Amanda is mysteriously killed. The end.

           The action moves at break-neck speed - a total of 160 scenes, comprising mainly entries
and exits from rooms, hotels and bars. Not being an expert on scripts, I again turn to Archer.
"What then is the essence of drama if conflict be not it? What is the common quality of themes,
scenes and incidents, which we recognise as specifically dramatic? [T]he essence of drama is
crisis." You will be hard put to find any crisis in this story. Glib, populist with a full measure of
acknowledgement to baser instincts - salacious Arabs feeling up young men, a salacious Arab
with a naked hooker, venal Pakistani thugs undoing belts as they strip naked the whistleblower's
wife, and other such clichés.

          If not dramatic enterprise, what then could be the motive? Tariq Ali's exposés of over 25
years of BCCI operations comprise details of the structure of the bank shareholdings, its culture
and ambitions, peppered with innuendoes over its shadowy intent. Does he then aspire to a
Michael Moore-on-banking status, a voice for the voiceless victims? Or is there some residual
grudge over his own relationship with the bank or 'the banker for all seasons?' Abedi is projected
as a villain, a Bhagwan Rajneesh-type megalomaniac, personally corrupt and ruthless. He doesn't
appear a lot in the script, but his villainy is pervasive.

         Does this portrait ring true? In over 100 hours of interviews with BCCI employees,
executives, directors and clients, some of whose careers lay shattered, others whose businesses
suffered, some who had to resort to legal action for the recovery of monies, I came across not a
single person who spoke of Abedi in other than reverential terms. Not one spoke of a culture of
expediency, short-termism or officially endorsed unprofessionalism, let alone corrupt practices in
the bank. Not a single charge amongst the many indictments against Abedi, Naqvi and many
others comprised charges of self-enrichment.

         So what is there to support the villainous evil enterprise theory? In October 1981, Tariq Ali
wrote in the New Statesman about Mr Masood Asghar, who had resigned from the group.
"Asghar threatened to sue... against the advice of friends, he returned to Pakistan. One morning a
group of soldiers burst in and Asghar was beaten and raped."

          This story has been repeated in Truell/Gurwin's False Profits (1992) and Beaty/Gwynne's
The Outlaw Bank (1993). Tariq Ali considers this foul act against Asghar relevant enough to be
repeated in the script, verbatim, from the mouth of the DA's deputy, just to reinforce the notion
of pervasive evil. My curiosity aroused, and I hunted down Masood Asghar and spoke to him
about his relationship with Abedi and BCCI. Herewith verbatim.

          Masood Asghar: "Mr. Abedi was the most gracious man I ever met. He gave me nothing
but respect. His final words to me when I called on him to say goodbye was 'come to me if there
is anything I can do for you.'"

          I persisted: "And what about stories of the alleged rape that have been repeatedly
published?" Masood Asghar laughs: "That story was my own fault. After a dispute had arisen
between some bank officials and myself on the interpretation of terminal benefits in my contract,
I initiated legal proceedings. At that time, a friend from the bank phoned me from London and
asked how I was doing. 'Yaar, the bank is buggering me around,' I replied. And so the story
began!" This then comprises the authenticity of evidence to support the supposed evil nature of
the enterprise!

          What then should be made of the bagful of other charges heaped on Abedi and the bank?
Unanimous in their praise for and defense of Abedi, those interviewed were equally vocal in
their indictments of Abedi's megalomania, his bizarre ramblings on metaphysics and
spiritualism, his cynical acquisition of people and the bank's legerdemain in accounting. Many
other organisational features, both of structure and form, were highlighted that were serious
enough to justify regulatory intervention but not to close down the bank.

          The Bank of England (BoE) was purportedly instructed by the then prime minister, John
Major, to close the bank in order to protect the depositors. That was the single most dangerous
action likely to damage those self-same constituents. But what were they being protected from?
Since the closure, efficient management by the liquidators has permitted the return of 81% to the
UK depositors and, it is likely, that payment in full will be made even after over $1 billion have
been spent on 'liquidation costs'. In the rest of the world not a single depositor lost their money.
Under an agreement with the liquidators, the majority shareholder (Abu Dhabi) paid over $2
billion to cover the dues of the depositors and that commitment had been unequivocally made by
the ruler of Abu Dhabi prior to the bank's closure. On July 4, the ruler's representative flew to
London to commit financial support to the proposed restructuring of the bank. At that meeting,
not a word was mentioned of the BoE's intent to close the bank the following day.

          BCCI's sins of false accounting, reckless lending and defalcation of the employees' welfare
benefits have been well documented but have been dwarfed subsequently by events at Enron,
WorldCom, One.Tel and Northern Rock, among other well known corporations who took down
billions of public money. BCCI, with the help of its principal shareholder, turned out to be
solvent.

          I cannot answer the question as to why this prolific and highly respected voice of our times
should, at this point, wish to be part of the continuum of BCCI-bashing. The library of exposés
feeding the hunger for sensationalism is large. Truell/Gurwin's False Profits is meticulous in
detail; Beaty/Gwynne's The Outlaw Bank, is more cerebral but miserly with the truth and
generous in fantasy; and Adam/Franz's A Full Service Bank details the sting operations against
BCCI in Miami . In the preface, Tariq Ali informs us that "the real story has yet to be told." What
then is still left to be told?

          Can it ever be determined that Abedi's vision of a 'South ' World Bank, independent of
Western control, funded by petrodollars, and organised for the development of the Third World
was anathema to the West? Will the story of a myriad of dedicated, hardworking professionals,
who carried unfairly a stigma not of their own making, ever be told? Will an even-handed
analysis of the real motive for destroying the bank ever be exposed? Unlikely. Western minds are
made up, eyes are closed and the deaf don't hear.

Philanthropist
INFAQ Foundation

Mr Abedi founded charitable organizations in UK, India, Bangladesh, Zimbabwe and Pakistan.
A large proportion of the profit made by BCCI was donated to these foundations, every year as
Mr. Abedi believed that the main objective of a person should be to help others. In Pakistan, the
BCCI Foundation (renamed Infaq Foundation after the closure of BCCI), provides funding to
charitable projects like hospitals, schools for special children, other educational institutions and
social welfare organizations. It also provide scholarships, mainly for university education, to
poor but brilliant students. It helps widow and other indigent persons in large number. As many
performing artists earn very little in the Third world, INFAQ Foundation provides financial help
and assistance to writers, scholars, artists and poets.It encourages them to teach their art to others
so that these arts survive.

The Infaq Foundation has only one office in Karachi, Pakistan. It has Capital and Reserves of
over Rs.2.50 billion, which in 2009 are equivalent to just over US$30 million. Major
beneficiaries among the known institutions are, Sind Institute of Urology and Transplantation,
National Institute of Cardio Vascular Diseases - Karachi, GIK Institute of Engineering Sciences
& Technology, Topi, North-West Frontier Province, Lady Duffirin Hospital and Sir Syed
University of Engineering and Technology, Karachi. President Ghulam Ishaq Khan was the first
Chairman of the Foundation from 1983 through 1995. Another eminent personality, a supreme
court judge and a former Governor of Sindh - Justice Fakhruddin G Ibrahim, Hilal e Pakistan
took over and is now the Chairman.

The Foundation has always been managed by highly competent Chief Executives. From 1981 to
1999 retired federal secretaries were Secretaries General of the Foundation. From 1999 to 2008
the position was held by Mr. Sohail Kizilbash, a Chartered Accountant qualified in UK and a
person with long banking experience. From 2009 another Chartered Accountant and former
banker Mr. Anwar Gillani is the Honorary Secretary General.

Mr. Abedi also founded BCCI FAST in 1980 with a donation of Rs. 100 million, to promote
education in computer science. It is now the first multicampus university of Pakistan, known as
National University of Computer and Emerging Sciences. It has four campuses situated in
Islamabad, Peshawar, Karachi and Lahore.

GIK University was also the brainchild of Mr. Abedi. He felt that Pakistan should have another
university for higher education, at Ph.D. level, for engineering and sciences and it should be
comparable to universities in any developed country.

 Agha Hasan Abedi Auditorium at GIK Institute, Pakistan, was named after him.
 The Gold Medal at the National University of Computer and Emerging Sciences (FAST),
awarded to the highest CGPA Holder of the batch, is known as the Agha Hasan Abedi
Gold Medal.
 His London home was in the London outskirts, in the affluent Harrow on the Hill, and
was previously owned by Anthony Trollope
 In the words of former BCCI Chief Financial Officer Masih ur Rahman, who worked
alongside Abedi for nearly three decades,his sister had once commented that "I remember
looking into his eyes and seeing God and the Devil balanced equally in them."[2]