Money Laundering: Impact on Banks - Global

 

The Bank of Credit and Commerce International (BCCI) was involved in a number of scandals, including financial fraud, money laundering, and political connections. In 1991, prosecutor Robert Morgenthau charged the BCCI and two of its investors with stealing $20 billion from the bank's accounts. Morgenthau called the BCCI "the largest bank fraud in world financial history". The bank paid $10 million in fines and lost $550 million in American deposits, and the investors pleaded guilty. 

 

Here are some of the ways the BCCI's fraud unfolded:

 

·         Money laundering: The bank used shell companies, fake foundations, and anonymous real estate purchases to launder billions of dollars.

·         Political connections: The BCCI hired prominent Washington politicians to advance their efforts and bribed local officials to avoid detection by government investigators.

·         Western auditors: The bank's Western auditors ignored or missed signs of the fraud. 

 

The BCCI's collapse had enormous losses, estimated to be around $10 billion, with developing nations bearing the brunt of the losses. Many developing nations had placed large deposits of national reserves with the bank, as had some prominent international organizations. The BCCI scandal is considered a pivotal moment in financial history and serves as a lesson in the importance of vigilance, cooperation, and anti-money laundering efforts. 

 BCCI's demise began in 1986, when a U.S. Customs undercover operation led by Special Agent Robert Mazur infiltrated the bank's private client division at Tampa, Florida, and uncovered their active role soliciting deposits from drug traffickers and money launderers.

 In July 1991, a consortium of central banks, including the Federal Reserve, the Bank of England, and the Luxembourg Monetary Institute, coordinated the closing of a multinational bank known as the Bank of Credit and Commerce International (BCCI). The discovery of a massive and widespread fraud, perpetrated over several years, precipitated BCCI’s closure.  

The Bank of Credit and Commerce International (BCCI) was an international bank founded in 1972 by Agha Hassan Abedi, a Pakistani ex-banker. The Bank was registered in Luxemburg with head offices in Karachi & London. A decade after opening, BCCI had over 400 branches in 78 countries, and assets in excess of US$ 20 billion, making it the 7th largest private bank in the world

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Those who read this, also read:

1. Impacts of Money Laundering

2. Impacts of Money Laundering on Banks-General

3. Impact of Money Laundering on Banks- India

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