Notes From the Margins…

From BCCI to HSBC: the Age of Gangster Capitalism

  • July 24, 2012
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A long time ago, when words like globalisation and deregulation were still rumours on the political horizon, the Pakistani financier Agha Hasan Abedi founded the Bank of Credit and Commerce International (BCCI)     in 1972.     BCCI was originally intended to be a progressive international Third World bank that would compete with Western-based financial institutions, and it was strikingly successful, with some 400 branches in 78 countries.

Within two decades the bank was shut down in 1991, accused of involvement in a breathtaking array of criminal activities that included money laundering, weapons dealing, narcotraffic and terrorism.   Its clients included the Medellin cartel, the Abu Nidal network and Saddam Hussein.   The CIA and the Pakistani intelligence services used BCCI to channel profits from the Afghan heroin trade in order to finance the anti-Soviet mujahideen.

Oliver North’s network had various accounts with BCCI through which profits from the cocaine trade or the sale of weapons to Iran were used to pay the Contras in Nicaragua.   In 1992 a report on ‘The BCCI Affair‘ by a Senate Subcommittee headed by John Kerry and Hank Brown found that

[stextbox id=”alert”]BCCI’s criminality included fraud by BCCI and BCCI customers involving billions of dollars; money laundering in Europe, Africa, Asia, and the Americas; BCCI’s bribery of officials in most of those locations; support of terrorism, arms trafficking, and the sale of nuclear technologies; management of prostitution; the commission and facilitation of income tax evasion, smuggling, and illegal immigration; illicit purchases of banks and real estate; and a panoply of financial crimes limited only by the imagination of its officers and customers.[/stextbox]

These activities were facilitated through a web of companies that included US banks such as First American, which were bought or controlled by BCCI and also through a series of BCCI companies based in the Cayman Islands.     As the Kerry/Brown report noted

[stextbox id=”alert”]Among BCCI’s principal mechanisms for committing crimes were its use of shell corporations and bank confidentiality and secrecy havens; layering of its corporate structure; its use of front-men and nominees, guarantees and buy-back arrangements; back-to-back financial documentation among BCCI controlled entities, kick-backs and bribes, the intimidation of witnesses, and the retention of well-placed insiders to discourage governmental action.[/stextbox]

The absence of ‘governmental action,’ the report suggested, was not unrelated to the fact that so many governments and foreign intelligence services made use of its relaxed oversight, including Saudi Arabia and the CIA, which Kerry and Brown accused of blocking its investigation ‘ raising questions about the quality of intelligence the CIA is receiving generally, or its candor with the Subcommittee.’

The Senators were equally damning in their verdict on the Bank of England’s role in BCCI’s activities, claiming that its regulatory oversight was ‘ wholly inadequate to protect BCCI’s depositors and creditors, and the Bank of England withheld information about BCCI’s frauds from public knowledge for fifteen months before closing the bank.’

All this was rather dank and unedifying stuff and very un-British.   After all, we’re talking about the Bank of England here, at a time when the City of London was poised to become a financial services centre to match Hong Kong.

In this context it was better not to look too deeply into BCCI’s wider political connections or the collusion of legitimate mainstream financial institutions in its activities.

Instead the ‘outlaw bank’ was treated as a freakish aberration, and investigations focused on recovering the savings of its many small investors, and the world moved on to better days – or so it seemed.

Yet now, exactly two decades after the Kerry/Brown report, we find another US Senate Subcommittee accusing that great British institution HSBC, the second largest banking and financial services group in the world, of a ‘pervasively polluted’ compliance culture that ignored evidence that its subsidiaries were being used to siphon millions of dollars from Mexican drug cartels.

The report found that one of HSBC’s Mexican branches had 50,000 accounts in the Cayman Islands, which shipped some $7 bn to the US in banknotes by car and aircraft.       In addition, HSBC was also accused of providing money and financial services to banks in Saudi Arabia and Bangladesh that may have channeled money to   terrorist organizations, including al-Qaeda.

As the subcommittee chairman Carl Levin put it,   ‘HSBC used its US bank as a gateway into the US financial system for some HSBC affiliates around the world to provide US dollar services to clients while playing fast and loose with US banking rules.’

HSBC’s bosses have apologised, which is pretty much all bankers are ever expected to do no matter how gross their misdeeds.   But it is difficult to believe that HSBC is the only bank engaged in such activities, in   a   financial system that has enabled the global elite to spirit away an estimated £13 trillion   into offshore tax havens.

Tracking the origins of these profits is difficult, if not impossible, at least under the current regulatory system or lack thereof.       So from the vantage point of the early 21st century, Agha Hassan Abedi’s ‘outlaw bank’ no longer seems anomalous at all.

On the contrary, BCCI now looks like the harbinger of a new era of limitless corruption, in which the boundary between legitimate business and criminality becomes blurred, and banks and financial services provide the route to respectability for narcotrafficantes and gangsters of every description.

But then,   HSBC has said sorry, so no one can say that we haven’t made progress.




1 Comment

  1. Herbert Baierl

    24th Jul 2012 - 10:11 am

    Good article, you may have drawn a connection to the movie “The International”, and on the other side, assuming banks would behave perfectly legitimate, consider Bernard Lietaers quote: “Furthermore, I believe that greed and competition are not a result of immutable human temperament; I have come to the conclusion that greed and fear of scarcity are in fact being continuously created and amplified as a direct result of the kind of money we are using.”

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About Me

I’m a writer, campaigner and journalist.  My latest book is The Savage Frontier: The Pyrenees in History and the Imagination (New Press/Hurst, 2018).  The Infernal Machine is where I write on politics, history, cinema and other things that interest me.

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