BCCI Assets Are Seized In 8 Nations; Fraud Cited
Banking authorities in eight nations seized the assets of Bank of Credit and Commerce International on Friday, citing evidence of extensive fraud by the Luxembourg-based bank's management.
At a press conference in London, Bank of England governor Robin Leigh Pemberton said the bank, which has about $20 billion in assets, had fraudulently concealed losses from its lending and trading operations.
"This is a large, extensive fraud and has been going on for some time," the governor said. He did not disclose the size of the losses.
Owners Kept in Darkness
The royal family and government of Abu Dhabi, which owns 77% of the bank, was not informed in advance of the coordinated international action, he said.
BCCI, which operates in 69 countries, has about $7.4 billion in assets in Luxembourg and $3.2 billion in Britain.
In addition to those operations, regulators closed BCCI offices in the United States, Argentina, Canada, France, Spain, Switzerland, and the Cayman Islands.
The bank's U.S. agencies - in Los Angeles and New York - have have a total of about $240 million in assets. BCCI had planned to close the two offices by the end of October.
Under Watch in U.S.
BCCI has been under intense scrutiny in the United States. Last year the bank's Tampa agency, since closed, was convicted of laundering drug money.
Earlier this year, it was revealed that the bank had secretly acquired stakes in First American Bankshares Inc., a banking holding company based in Washington with $11 billion in assets, and Independence Bank, based in Encino, Calif., with $640 million in assets.
The Federal Reserve has ordered BCCI to divest itself of the unspecified stakes and barred it from conducting any business with the banks.
The coordinated moves against BCCI on Friday did not affect the operations of First American and Independence Bank. Both banks are separately capitalized and federally insured U.S. institutions, the Federal Reserve said in a statement.
Bank of England's Plans
The Bank of England said it has set up special unit to coordinate regulatory action worldwide. Regulators said they plan to liquidate the bank and pay off its creditors and depositors. Any sums remaining will be turned turned over to the Luxembourg banking authorities and ultimately to shareholders.
Mr. Pemberton said the Bank of England moved to take control of BCCI after finding that the fraud at BCCI extended over a number of jurisdictions and stretched back over several years.
Luxembourg's senior banking regulator charged that the bank had been involved in a massive conspiracy to deceive clients, shareholders and auditors.
"There are such huge international and internal problems that this may signify the end of BCCI," Pierre Jaans, the director of the Luxembourg Monetary Institute, told Reuters. The Luxembourg Monetary Institute oversees the country's banking system.
Mr. Jaans added that there was evidence of "an organised circle" within the bank engaged in fraud. He said the case was "very, very serious" but declined to give further details.
He said he had met BCCI shareholders and management on Friday in Luxembourg. The bank's activities in Luxembourg had been placed under "controlled administration," similar to bankruptcy laws in the United States. This meant it would be protected from creditors, he said.
Federal regulators, the Manhattan District Attorney's office and the Justice Department are separately continuing to investigate whether BCCI used it U.S. offices, as well as First American, to run an international money-laundering network.