Tuesday, May 29, 2007

Full Service Bank: How BCCI stole billions around the world

This is a great non-technical book which can serve as an introduction to forensic accounting.

BCCI was once a high flyer  banks because of who's who did business with it. It clients included infamous and notorious people such as Panamanian strong man Manuel Noriega, dread terrorist Abu Nidal, shady arms dealers such as Adnan Khashogi among many others.

BCCI is classic story of a business entity which burnt out like bright star too much glitter too short. It collapsed under the weight of its own misdeeds. The bank ignored every rule of ethical business with a sole aim of growth. It did not mind cutting corners, flouting rules with gay abandon, took money without caring for the source, incorporated itself in pieces in several countries. Even auditors could not construct a full picture of this bank till government agencies had some undercover operations going. BCCI is supposedly the biggest "ponzi" scheme in the history.

BCCI was started by an ambitious Pakistani called Agha Khan Abedi. After serving in several banks, this smart banker wanted to be his own boss and using his contacts in rich sheikdoms, he started the bank with initial deposits from several rich sheikhs of the middle east. BCCI bought several banks in the world and thus became one of the leading banks.

US customs and DEA were conducting under cover operations on drug mafia at the same time as when BCCI was growing. When undercover agents started understanding how the drug mafia used banking system, they stumbled upon on many innovative schemes employed by several banks. But BCCI was at the top of the list with unheard of practices and making use of every loop hole in the system. So the focus shifted from drug busts to banking system investigation.

One dare devil agent from US customs systematically went after BCCI and brought about its collapse. How this undercover agent went about cultivating the contacts within BCCI, how he used his other operation (drug busts) to provide impressive business to BCCI and how at the end he had both drug smugglers and their bankers in his net.

The finale of the bust of quite funny. All kingpins from drug mafia and BCCI were invited to fictitious wedding of this undercover agent. His fiance was also an undercover agent. When the guest came to the wedding, after initial food and drinks, they were asked to join a bachelor party. When the guests showed up at the bachelor party and got out of their limousines, they were promptly arrested and their rights were read out to them.

It was coordinated effort across many countries that effected the closure of BCCI. It was a good thing to have closed the bank. Sad thing is many small time depositors lost their life's savings. Many people who had toiled their lives in their jobs with bank had to see their career gone to dogs.

The final closure and legal actions against BCCI were the subject of many controversies. UAE Sheiks allege that Western world did not want to see a small bank from Islamic world becoming one of the biggest banks. They say they really wanted to pump in around 5 billions even at the end which could have saved small time depositors from the ruin and would have given another chance to the bank. But, regulators say it would have been the worst thing to allow some shady bank like BCCI to continue to operate if one had any respect for law and interest in curbing bad things such as drugs and terrorism.

BCCI brought a new meaning to dirty word "money laundering". If it were not to be detected and closed in time, money laundering would have been formalized and become more important than making money legally.

Great book. Fast read.


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