By Anjum Ibrahim, "BCCI Fiasco" [Lahore, The Nation in English, 3 Aug 91, p. 6]

The Bank of Credit and Commerce International (BCCI) has been in the headline news in nearly every country of the world. Its links with international terrorism, specifically with Abu Nidal credited with several hundred deaths, its drug money laundering operations for people like Noriega, and its internal corruption and incompetence spreading outwards to incorporate prominent politicians around the world, including high-level governmental bureaucrats, makes BCCI a scandal which will be remembered in the annals of banking history.

Strangely enough, the Pakistani view is divergent. Part of the reason is that Agha Hassan Abedi, the Bank's chief, has Pakistani nationality. He had also spread his tentacles very effectively with Pakistan through his policy of hiring the children of prominent Pakistanis, i.e, those resident Pakistani who wished to work abroad and could not do so due to their inability to procure working papers. BCCI was also known within the banking circles in Pakistan to hire people on the basis of nepotism. It is no wonder then that incompetence was one of the charges levied against the Bank. But of course one cannot dismiss all those working in the BCCI as incompetent. And there is a very real fear that with the closure of the Bank, a request made by the British government to the largest shareholder of the Bank, namely the Emir of the United Arab Emirates, many Pakistanis would become unemployed with little or no prospects for gaining employment within the banking system of any other country, including that of Pakistan. Thus the employees of BCCI, largely Pakistanis, would suffer greatly. This is despite the fact that Western experts believe that all the charges levied against the BCCI were in effect due to the connivance of a very small number of the top level managers of the Bank and that the bulk of the employees were not taken into confidence.

The second reason for our government support to the BCCI top management in Pakistan is due to its covert help extended to what is being termed as our ability to make a nuclear bomb. Perhaps this was the reason why our Prime Minister (PM) Nawaz Sharif actually visited the ex-BCCI chief Mr. Abedi at his home in Karachi recently. Typically, our PM ignored the fact that this issue is responsible for the cessation of the U.S. aid package to Pakistan and there is a real fear that the United States may prevail on the international community to withdraw aid from those countries involved in a nuclear program. And as we are aware, in Pakistan our economy will not be viable unless and until a certain minimum level of aid is incurred this year--a level which we have not really succeeded in procuring so far. Thus Mr. Nawaz Sharif's hasty tacit support of Mr. Abedi, evident after his visit, could have serious repercussions on the whole economy.

There is also support of the BCCI from those Pakistanis who believe that the Bank was serving the Muslim world and more to the point, taking money from the rich oil sheiks and distributing it to the poor in the Third World in general and the Muslim countries in particular. This once again is considered a sham by the investigators of the Bank of England and supported by the fact that poor Asian depositors of the Bank are left without their savings and are clamoring for justice. And according to The Sunday Times dated 21 July: "Intelligence agencies from several Western countries, including America and Israel, allegedly cooperated with the black network, which was a 1,500-member organization run from BCCI's office in Karachi, Pakistan." Thus the Robin Hood tactics of taking from the rich to give to the poor was certainly not either the goal or the target of the BCCI. All that the expected demise of the Bank has done for Pakistan is to perhaps make it a pariah in the international community and it is indeed unfortunate that there is still official support for this Bank in the country.

The State Bank of Pakistan has refused to shut down operations of the BCCI in Pakistan in spite of the request to do so by the British government. And the question we should be asking ourselves is, what can be its cost to us? First of course Britain gave us a loan amounting to 91.4 million dollars in fiscal year 1989-90, part of which is probably still in the pipeline which can be arrested. And secondly our exports of 7,224 million rupees to the United Kingdom (for July-March 1990-91) might be summarily stopped by the British government. It is also relevant to note that Pakistan registered a trade surplus with the United Kingdom in the year mentioned.

Whatever the failures of the BCCI which forced it to arrest all its operations in the West through legislation, nonetheless it is essential that some regulatory mechanism applicable to the banking system be in force for the protection of depositors. But can blame and total responsibility accrue to the Central Bank? Apparently not, according to The Economist, which states: "Like any bank regulator, the Bank of England cannot be expected to prevent fraud altogether. That would require a policemen in every office (and even they could be bribed). Nor can it ensure that, if massive fraud means that a bank must be closed, depositors will not lose some money..." That is why the Bank and its fellow regulators overseas, cannot be blamed merely for having closed BCCI. Once a bank has been shown to be insolvent--which, because of the fraud this bank was--closure is the only fair way to treat the depositors. If depositors were merely warned, those who heard first would get all their cash out first, leaving much less for the poorly informed or the poorly connected. If the bank had been closed in July 1990 or July 1987, depositors would still have lost money, and would still be clamoring for compensation. Thus the question is the time limit that a regulatory body ought to take from suspicion of fraud to getting proof of the fraud to eventual closure of the bank.

The sequence of events for Pakistan are as follows: a) 13 years ago the Bank of England blocked BCCI from expanding its branch network in the United Kingdom restricting it to a secondary bank status; b) Under the 1987 Banking Act, the Bank of England decided that BCCI was 'fit and proper'. The British media feels that bribes may have been responsible for this ruling; c) Senior BCCI officials were charged in 1988 for drug money laundering. The indicted officials claimed that top-level managers in BCCI knew and approved of such operations; d) In 1988, the Bank of England was worried about BCCI and started an international college of regulators where it cooperated with other countries in supervising the BCCI: e) The U.S. Banking sub-committee learnt that BCCI "had an international reputation for capital flight, tax fraud, and money laundering that far exceeded the conduct charged" in the Florida indictment; f) American authorities made requests to Price Waterhouse, a British accounting firm, for information on BCCI. Bank of England refused, saying that under the 1987 Banking Act it could not reveal confidential information; g) In March 1990, Price Waterhouse revealed serious holes in the BCCI accounts but the BCCI still continued operations; h) In October the same year, an American lawyer read a report accusing BCCI of the "biggest fraud in history"; i) In June 1990, Vivian Ambrose, an employee of BCCI, wrote a letter to Tone Benn alleging that the BCCI had 'widespread corruption'; j) August 1990, BCCI moved many of its account documents to Abu Dhabi; k) In January this year, inquiries were made by the Bank of England and BCCI operations shut down on July 5 this year in the United Kingdom.

This sequence of events brings some questions to mind, the foremost of which is as to why the State Bank of Pakistan has not closed down operations of BCCI in this country. And is refusing to do so. Did the corruption associated with the Bank filter to our State Bank as well? And why are the depositors being ignored in this country?