The_Info_Web/20 - ORGANIZATIONS/PRIVATE/Bank of Credit and Commerce International.md

title	aliases	created	updated	tags	category	summary	start	end	location	relations
Bank of Credit and Commerce International	Bank of Credit and Commerce International BCCI Sandstorm	2024-04-25	2026-10-15	Organization Private Banking International Scandal BCCI IranContra OctopiNetwork	BCCI Scandal	Pakistani-founded international bank, registered in Luxembourg and the Cayman Islands, that secretly owned US banks and laundered money for traffickers and intelligence clients before regulators closed it on July 5, 1991.	1972-09-21	1991-07-05	Luxembourg	type with reverse role start end fn owned Bank of America true shareholder, 30 percent in 1977, divested 1978 1972 1978 3 type with role fn owned First American Bank secret owner through nominees 7

BCCI was a financial institution that became embroiled in a major scandal involving money laundering, drug trafficking, and covert operations. Its collapse had far-reaching implications and was a significant focus of Danny Casolaro's "The Octopus" investigation.¹ The BCCI Kerry-Brown Senate Report of 1992 described it as "a $23 billion criminal bank operating in some 73 countries."²

Involvement in Illicit Activities

Adnan Khashoggi, an international arms merchant, borrowed money for arms purchases related to the Iran-Contra Affair from BCCI accounts, with Saudi and U.S. backing.¹ Lester Coleman, a Defense Intelligence Agency covert intelligence officer, was paid in travelers checks sent from the Luxembourg branch of the now-collapsed BCCI.¹

Danny Casolaro was investigating the BCCI scandal as part of his broader "The Octopus" probe, believing it was interconnected with the PROMIS Software Scandal and the Iran-Contra Affair. He obtained papers referring to Iran-Contra arms deals, including photocopies of checks drawn on BCCI accounts for Adnan Khashoggi and Manucher Ghorbanifar, from his confidante Bob Bickel.¹

Bill Turner, a friend and confidante of Danny Casolaro, claimed to have seen papers from Casolaro that connected Oliver North and BCCI.¹

Founding and Bank of America

According to the Senate report, Abedi's first choice of a Western partner, American Express, "insisted on having a major say in BCCI's management, which Abedi would not tolerate." He turned instead to Bank of America, for which BCCI offered "a potentially lucrative entry to Arab oil wealth, at a tiny capitalization cost of just $2.5 million." After what Abedi called "an historic lunch" in San Francisco, the American bank agreed to be a passive partner; Abedi told Euromoney in 1978: "Bank of America agreed to become a shareholder, but we made it a condition that we would establish the management style." BCCI began with 3 million dollars in total capital. Bank of America officials sat on its board: Yves Lamarche, formerly head of its Middle East operations; J.D. Van Oenen; P.C. Twitchen; and, from Iran, Roy P. M. Carlson, who later became president of the National Bank of Georgia when it was secretly owned by BCCI. The ruling family of Abu Dhabi, whose initial cash investment of 500,000 dollars was acknowledged to the Senate subcommittee for the first time on May 14, 1992, provided deposits; the Middle Eastern royal shareholders were given "hold harmless agreements" against loss, and insiders called the board "RAF," for "rent-a-face."³

A Bank of America record of September 30, 1977, listed BCCI's majority owner as ICIC, its Cayman affiliate, with 50.1 percent; Bank of America held 30 percent, Majid Al-Futaim of Dubai 4 percent, and the Abu Dhabi ruling family 3.4 percent. A Bank of America executive vice president, Alvin C. Rice, wrote in a memorandum of May 10, 1976: "We are just not operating on the basis of mutual trust and cooperation that make the whole effort and exercise worthwhile," and later told journalists that BCCI believed regulatory obstacles could be fixed through "baksheesh." By early 1978 an examiner of the Comptroller of the Currency in London concluded that Bank of America was "substantially at risk from BCCI." Bank of America sold its stake to ICIC, announcing on January 30, 1978, that "the close co-operation that has developed between the two banks will be maintained"; over the following decade it kept correspondent relationships with BCCI and, the report found, colluded "in at least one of BCCI's purchases of foreign banks through nominees in South America."³

Chronology

1972: Agha Hasan Abedi organizes BCCI with the intention of forming the Third World's first multinational bank.⁴

1975: Using Abbas Gokal as a front, BCCI attempts to acquire Chelsea National Bank in New York City. Regulators reject the bid due to concerns about BCCI's involvement.⁴

1976: BCCI opens its Cayman Islands subsidiary ICIC, which becomes BCCI's repository for loans to privileged insiders. ICIC Holdings and ICIC (Overseas) Ltd. were incorporated on April 6, 1976.⁴⁵

1977: Eugene Holley introduces Bert Lance to Abedi.⁴

1978: Ghaith R. Pharaon finalizes his acquisition of National Bank of Georgia from Bert Lance with Abedi's help. Abedi pays off Lance's $3.5-million bank loan. BCCI orchestrates a hostile bid for Financial General Bankshares of Washington, D.C. with Lance's help; on January 30, 1978, the BCCI officer Abdus Sami advised Abedi to spread ownership among "4 persons of substance" to keep each below 5 percent.⁶ Joseph E. Vaez submits a report on BCCI characterizing it as dangerously out of control. The Securities and Exchange Commission files suit against BCCI, Abedi, Lance, and others in connection with the purchase of Financial General Bankshares stock.⁴⁷

1979: The Soviet Union invades Afghanistan, making Pakistan a key strategic priority for the United States.⁴

1981: Regulators approve the sale of Financial General to Middle Eastern investors connected with BCCI, based on Clark Clifford's assurances of no link between BCCI and Financial General Bankshares. The Federal Reserve later found that BCCI owned at least 25 percent of the holding company, Credit and Commerce American Holdings, when it acquired First American Bank in 1982.⁴⁷

1982: Lance introduces Abedi to Jimmy Carter. BCCI illegally acquires Independence Bank of Encino using Ghaith Pharaon as a front man. BCCI helps Adnan Khashoggi finance arms sales to Iran as part of the Reagan Administration's Iran-Contra Affair. BCCI suffers over $440 million in losses from options trading through its subsidiary Capcom, according to Beaty and Gwynne; the Senate report, citing Price Waterhouse, dated the Capcom losses to 1985 and put them at 500 million dollars.⁴⁸

1986: The Central Intelligence Agency issues a report stating that BCCI has owned First American Bank since 1982.⁴

1987: Pharaon becomes a partner in David L. Paul's CenTrust Savings Bank of Miami. First American Bank buys the National Bank of Georgia from Ghaith Pharaon for $227 million, according to Beaty and Gwynne; the Senate report gives 220 million dollars.⁴⁹

1988: Clifford and Robert Altman sell their stock in First American to Mohammed Hammoud. Abedi's heart attack ends his direct control of BCCI, and Swaleh Naqvi becomes chief executive. Amjad Awan tells an undercover agent that BCCI owns First American and National Bank of Georgia. On October 8, American Customs agents of Operation C-Chase arrest BCCI bankers at a staged wedding in Tarpon Springs, Florida, with arrests in London and Paris, on money laundering charges.⁴¹⁰

1989: Jack Blum visits Manhattan District Attorney Robert Morgenthau to persuade him to take on the BCCI case.⁴

1990: BCCI pleads guilty to money laundering in Tampa, Florida, in January, forfeiting $14 million. A Tampa jury convicts the BCCI officers on July 29, and they are sentenced on November 30, Awan and Akbar Bilgrami to twelve years each. The first Price Waterhouse audit reveals a $1.7 billion black hole in the bank's accounts. A second Price Waterhouse audit details thousands of irregular transactions and confirms BCCI's control of First American. The Bank of England agrees to let BCCI move its headquarters and records to Abu Dhabi.⁴¹⁰¹¹

1991: Zayed bin Sultan AL-Nahayan acquires 77 percent control of BCCI. The Federal Reserve orders BCCI to sell illegally acquired shares in First American Bank. Regulators worldwide seize BCCI offices on July 5, placing over 75 percent of the bank's assets in government hands. On July 29 a New York State grand jury indicts BCCI, Abedi, and Naqvi for fraud, bribery, grand larceny, and money laundering, and the Federal Reserve Board fines BCCI $200 million for illegally acquiring control of First American Bank, National Bank of Georgia, and CenTrust Savings. Clifford and Altman resign from First American. BCCI's liquidators plead guilty and agree to forfeit $550 million.⁴⁷¹²

1992: Khalid bin Mahfouz is indicted by a Manhattan grand jury. Kamal Adham pleads guilty in New York and agrees to cooperate with Morgenthau and the Department of Justice. Clifford and Altman are indicted by Manhattan District Attorney Robert Morgenthau and a federal grand jury.⁴

Closure

Through late 1990 and the spring of 1991, according to the Senate report, BCCI, Abu Dhabi and the Bank of England worked on a plan to reconstitute the bank as three institutions based in London, Abu Dhabi and Hong Kong, while all of them, with Price Waterhouse, "worked together to keep what they knew about BCCI secret," including from Morgenthau. The Federal Reserve "had been fully alerted to the state of affairs at BCCI for the first time not by the Bank of England, but by the Manhattan District Attorney." In March 1991 the Bank of England commissioned Price Waterhouse to investigate under Section 41 of the Banking Act; its draft report of June 22, 1991, the Sandstorm Report, in which BCCI was code-named "Sandstorm," found "fraud on a significant scale." One week later the Bank of England alerted the Serious Fraud Office, and four days after that, on July 5, 1991, BCCI was closed internationally.¹¹ The Senate report concluded that "the pressure from a single, local prosecutor's office that would not relent when it found evidence of global criminality, proved sufficient to shut down a $23 billion criminal bank operating in some 73 countries," since the Bank of England "had reason to know that the New York District Attorney was only a few weeks away from indicting BCCI."²¹¹ The British inquiry into the Bank's supervision, the Bingham Report, found the closure "an appropriate course of action."¹³

Prosecutions and Forfeiture

On July 29, 1991, the day of Morgenthau's indictment, the Federal Reserve announced a 200 million dollar civil penalty against BCCI and related banks and sought to bar Abedi, Naqvi, Hasan Mahmood Kazmi, Adham, Faisal Saud Al-Fulaij, A. R. (Abdul Raouf) Khalil, Sayed Jawhary, Pharaon and Khusro Elley from American banking. It found that BCCI had acquired CCAH shares in its customers' names through loans "with side agreements that the customer would not be required to repay," and that BCCI "resorted to these arrangements because BCCI was told it could not receive the necessary approvals from the Federal Reserve Board to acquire a bank in the United States."⁷ By December 1991 BCCI's liquidators had pleaded guilty to the first six counts of the New York indictment "as part of an agreement concerning BCCI's assets in the United States," and a superseding information was filed in the federal court in Washington on December 19, 1991.²⁸ British prosecutions followed: Syed Ziauddin Ali Akbar, head of the treasury division, was sentenced in 1993 and Abbas Gokal of the Gulf Group in 1997.¹⁴

BCCI's Washington defense was coordinated in part by former federal prosecutors. Lawrence Wechsler recruited E. Lawrence Barcella, Jr. "to coordinate the bank's defense" shortly after the October 1988 Tampa indictment, and the Senate report stated that "the full extent of Barcella's activities on behalf of BCCI remains unknown."¹⁵ The Senate subcommittee could not determine what, if any, services Paul Laxalt performed for the bank, although Barcella had tried in 1988 to persuade Laxalt, his firm's lead partner, to meet BCCI's chief executive in London.¹⁵

A 1992 press account gave a different date, stating that BCCI hired Barcella in 1990.¹⁶ Barcella and Wechsler represented the bank in the meetings at which Tampa prosecutors agreed to a plea in January 1990.¹⁷ Robert Parry wrote that Barcella and his firm earned more than $2 million from BCCI, and that the Laxalt and BCCI links were omitted from the public report on the October Surprise investigation.¹⁸

On December 9, 1992, BCCI's court-appointed liquidators sued Khalid bin Mahfouz, Haroon Kahlon and the National Commercial Bank in the United States District Court for the District of Columbia under the Racketeer Influenced and Corrupt Organizations Act, seeking more than 10.5 billion dollars trebled. The court enjoined bin Mahfouz and Kahlon from moving assets in the United States on December 10, 1992, issued a preliminary injunction against bin Mahfouz on February 12, 1993, and on July 26, 1993 conditionally dismissed the action on forum non conveniens grounds in favor of a parallel English suit for the same amount.¹⁹

Congressional Inquiries and CIA Accounts

A CIA memorandum, undated and approved for release in August 2003, refers to a House October Surprise Task Force "formed to investigate allegations that officials from the Reagan campaign sought to delay release of the hostages in Iran until after the 1980 election," a body the House created on February 5, 1992.²⁰²¹ The memorandum states that the House Banking Committee had subpoenaed First American for all of its records pertaining to CIA accounts in its investigation of BCCI, and that the agency did not then hold any accounts at First American.²⁰ The agency had briefed two cleared committee staffers on the First American accounts and had provided the committee with intelligence reports on BCCI, and it had indicated a desire to cooperate "so long as it would not require access to operational information." The committee nonetheless sent a letter to the ADCI asserting its right to review all records and interview CIA officers "regardless of the sensitivity of the information."²⁰

The agency had also tried to obtain the help of the House Permanent Select Committee on Intelligence to act as a surrogate for the Banking Committee in reviewing sensitive operational information, but the Banking Committee had refused to accept any role for it.²⁰ The memorandum proposed points to be made to the committee, including that the agency was "prepared to resist demands for access by the Banking Committee to sensitive operational information, and will, as a last resort, seek to protect this type of information from disclosure by requesting that the President invoke Executive Privilege." The agency was also prepared to ask the Department of Justice "to seek a Temporary Restraining Order that would relieve First American Bank from having to comply with the Banking Committee subpoena."²⁰

The memorandum records a request from the October Surprise Task Force for information on official and unofficial arms sales to Iran of U.S. origin or U.S. content from November 1977 through August 1985, including field reporting and operational strategies. It states that a "similar concern could also arise with the October Surprise Task Force investigation," and that the agency would "attempt to work out a compromise that would satisfy the Task Force's desire for information while protecting intelligence sources and methods."²⁰

Liquidation

The liquidators, Touche Ross, reported a year into the liquidation that the true picture of BCCI's activities had been distorted by practices such as "loan parking" and "artificial fund transfers."⁸ The Abu Dhabi shareholders, who held 77.4 percent of BCCI at its closure, agreed a 1.8 billion dollar compensation package for creditors in November 1994, which received its last legal clearance, from a court in Luxembourg, in December 1995. An agreement with the liquidators in May 1996 allowed an initial payment of 1.55 billion dollars, a first dividend of 20 percent to more than 250,000 creditors, with 10 to 20 percent more to follow; by October 1997, 80 percent of small depositors in the United Arab Emirates had been repaid in full.²² In 2005 the liquidators abandoned their suit against the Bank of England, Three Rivers District Council v Bank of England.²³

Footnotes

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1. Seymour, Cheri. The Last Circle: Danny Casolaro's Investigation into the Octopus and the PROMIS Software Scandal. First Edition. TrineDay, 2010. ↩︎

2. Kerry, Senator John, and Senator Hank Brown. The BCCI Affair: A Report to the Committee on Foreign Relations, United States Senate. December 1992, ch. 9, "BCCI and Law Enforcement: District Attorney of New York." https://irp.fas.org/congress/1992_rpt/bcci/09ny.htm ↩︎

3. Kerry and Brown, The BCCI Affair, ch. 3, "The Origin and Early Years of BCCI." https://irp.fas.org/congress/1992_rpt/bcci/03hist.htm ↩︎

4. Beaty, Jonathan and Gwynne, S. C. The Outlaw Bank: A Wild Ride into the Secret Heart of BCCI. New York: Random House, 1993, pp. 11-14. ↩︎

5. Kerry and Brown, The BCCI Affair, ch. 4, "BCCI's Criminality." https://irp.fas.org/congress/1992_rpt/bcci/04crime.htm ↩︎

6. Kerry and Brown, The BCCI Affair, ch. 6, "BCCI in the United States: Initial Entry and FGB and NBG Takeovers." https://irp.fas.org/congress/1992_rpt/bcci/06early.htm ↩︎

7. Board of Governors of the Federal Reserve System, press release, July 29, 1991. https://www.federalreserve.gov/supervisionreg/files/19910729.pdf ↩︎

8. Kerry and Brown, The BCCI Affair, ch. 4, "BCCI's Criminality" (Price Waterhouse and Touche Ross findings). https://irp.fas.org/congress/1992_rpt/bcci/04crime.htm ↩︎

9. Kerry and Brown, The BCCI Affair, ch. 7, "BCCI in the United States: Part Two." https://irp.fas.org/congress/1992_rpt/bcci/07later.htm ↩︎

10. United States v. Awan, 966 F.2d 1415 (11th Cir. 1992). https://law.resource.org/pub/us/case/reporter/F2/966/966.F2d.1415.90-4114.html ↩︎

11. Kerry and Brown, The BCCI Affair, ch. 12, "The Regulators." https://irp.fas.org/congress/1992_rpt/bcci/12reg.htm ↩︎

12. Kerry and Brown, The BCCI Affair, ch. 1, "Executive Summary." https://irp.fas.org/congress/1992_rpt/bcci/01exec.htm ↩︎

13. House of Commons, "BCCI (Bingham Report)," Hansard, October 22, 1992. https://api.parliament.uk/historic-hansard/commons/1992/oct/22/bcci-bingham-report ↩︎

14. "BCCI official gets six years for fraud charges," United Press International, September 28, 1993. https://www.upi.com/Archives/1993/09/28/BCCI-official-gets-six-years-for-fraud-charges/3315749188800/; "Gokal sentenced to 14 years for BCCI fraud," The Irish Times, May 9, 1997. https://www.irishtimes.com/business/gokal-sentenced-to-14-years-for-bcci-fraud-1.70650 ↩︎

15. Kerry, Senator John, and Senator Hank Brown. The BCCI Affair: A Report to the Committee on Foreign Relations, United States Senate. December 1992, ch. 17, "BCCI's Lawyers and Lobbyists." https://irp.fas.org/congress/1992_rpt/bcci/17law.htm ↩︎

16. "Head of Iran Hostage Probe Linked to Arms Deal," Hartford Courant, May 29, 1992. https://www.courant.com/1992/05/29/head-of-iran-hostage-probe-linked-to-arms-deal/ ↩︎

17. Kerry and Brown, The BCCI Affair, ch. 8, "BCCI and Law Enforcement: The Justice Department and the U.S. Customs Service." https://irp.fas.org/congress/1992_rpt/bcci/08just.htm ↩︎

18. Parry, Robert. "October Surprise X-Files (Part 8): Lies Spun into History." Consortium News, 1996. https://www.consortiumnews.com/archive/xfile8.html ↩︎

19. BCCI Holdings (Luxembourg), Societe Anonyme v. Mahfouz, 828 F. Supp. 92 (D.D.C. July 26, 1993) (Green, J.), Civ. A. No. 92-2763. https://static.case.law/f-supp/828/cases/0092-01.json ↩︎

20. Central Intelligence Agency, memorandum, undated, "BCCI and October Surprise Task Force," approved for release August 2003. CIA Reading Room document 0000984226. https://archive.org/details/cia-readingroom-document-0000984226 ↩︎

21. U.S. House of Representatives, October Surprise Task Force, Joint Report of the Task Force to Investigate Certain Allegations Concerning the Holding of American Hostages by Iran in 1980, H. Rept. 102-1102, January 3, 1993, Legislative History (task force formed February 5, 1992 under H. Res. 258). https://archive.org/details/6199732-Joint-Report-of-the-October-Surprise-Task-Force ↩︎

22. "BCCI small depositors paid in UAE," United Press International, October 11, 1997. https://www.upi.com/Archives/1997/10/11/BCCI-small-depositors-paid-in-UAE/2814876542400/ ↩︎

23. Three Rivers District Council and Others v. The Governor and Company of the Bank of England [2006] EWHC 816 (Comm). https://web.archive.org/web/20260203100053/https://www.bailii.org/ew/cases/EWHC/Comm/2006/816.html ↩︎