© John Lea 1991
In the world of organized crime the event of the year, if not of the decade was the closure last July of the Bank of Credit and Commerce International. BCCI was forced to shut down by the Bank of England after the auditors reports had revealed a truly extraordinary state of affairs. Here was the largest private bank in the world with over 400 branches in 73 countries yet with $400m of its assets simply unaccounted for, $1bn of loans which were obviously never intended to be repaid plus an unspecified number of loans without collateral to fictitious names plucked at random from the Kuwait telephone directory. Also $1.7bn of deposits had simply vanished after being passed to International Credit and Investment Co. (Overseas) Ltd. a secret unregulated Cayman Island subsidiary of BCCI whose existence was known only to a handful of senior bank officials, a 'bank within the bank'.
Many of the 'loans' which were not intended to be repaid ended up in the pockets of rich Gulf Sheiks financed from the deposits of small savers and businesses largely from the third world or Asian communities in the West. Hundreds of Asian restaurants and small businesses in Yorkshire currently face ruin as a result of having been attracted by BCCI above average interest rates on deposits combined with a public relations image as 'banker to the third world and the Muslim communities'
The Western financial press was of course awash with righteous indignation over the summer as tongues wagged and revelations hit the headlines at a brisk pace. The Financial Times pondered the "central question of how this bank was able to perpetrate not just a single gigantic fraud but at least five major sets of fraud over a period lasting a decade or more." (August 6th 1991). Bank fraud has been on the increase world wide since the mid 1980's: witness the current scandals rocking the Japanese political establishment. The fundamental cause is the growing amount of fictitious capital in relation to real surplus value accumulation and the resulting mountain of debt in the capitalist world. Fraudsters are simply breaking the normal rules of stable capital accumulation in a desperate attempt to turn paper - or rather electronic - money into real assets. For the third world financiers represented in the senior management of BCCI, desperate to break into the system dominated by Western and Japanese banks, mass ive unsecured loans to rich Gulf Arabs were no doubt an attempt to buy political and financial power in the petrodollar market.
The connection between BCCI and international organized crime is another version of the same process. As world imperialism drove down prices of crops like coffee in Latin America and cotton in South East Asia while at the same time creating armies of unemployed desperate young people in the ghettos of North American and - increasingly - European cities, the production of heroin and cocaine has become increasingly profitable. Due to the amazing price mark up from initial production to final purchase, illegal drugs are second only to arms as the world's most profitable commodity.
Just as BCCI's financial fraud siphoned the savings of third world and ethnic minority poor into the coffers of the Gulf Sheiks, so the drugs trade siphons money from drug addicts in the west to the 'narco-capitalists', the drug lords of Cali and Medellin and the opium growers of South Asia. Again, for a group of bankers willing to use any means to break into the international financial system, the drugs cartels are ideal customers. Awash with money, most of it in the form of small denomination notes from the street level drug sales, they need to get it into the banking system and hide its origins. The banking service they most require is therefore 'money laundering'. In recent years under pressure from the United States, banks around the world have relaxed their rules on customer privacy. In the US for example since 1984 Cash Transit Reports have to be filled in for any deposit over $10,000 recording the identity of the depositor. UK banks since 1986 have been required to notify the National Drugs Intelli gence Unit if they become suspicious of the origin of any deposits. So a criminal bank, rather than the odd corrupt cashier in a legitimate bank, is ideal for the money launderers.
BCCI's activities in this area had in fact been known for some time. Indeed the bank was known among drugs law enforcement agencies around the world as 'The Bank of Cocaine and Crime International'. There were two cases in Florida in the late 1980's in which the local BCCI branch was implicated. In the first case the bank paid a $15m fine and in the second two senior executives were sent to prison for 12 years. These incidents were until recently seen as criminal acts by branch managers and clerks rather than a central policy of the bank as a whole.
The sort of information that revealed the true state of affairs was provided by Daniel Gonzales, former deputy manager of BCCI in Panama who informed US investigators that he had been told by no less than the bank's vice President to seek clients from the drug cartels in order to increase deposits. He also revealed how Panama branch officials worked late into the night counting multi-million dollar cash deposits from clients who arrived at the bank with container loads of small bills. The money often arrived, he said, in vans with a military escort provided by General Noriega. Depositors included the notorious Colombian Medellin cartel leaders Pablo Escobar and Jorge Ochoa and members of the Panamanian military including Noriega himself.
The multi-million dollar transactions that were carried out "were so great that we had barely recovered from one avalanche of notes when the next one was waiting to be counted." Gonzales has recently published a book - no doubt his memoirs as manager of the Panama branch of BCCI - entitled 'The Kings of Money Laundering' which has become a best seller in Panama. He is also due to testify in the trial of general Noriega currently getting under way in the US.
But the story goes much further. After the 1988 conviction of Florida branch BCCI officers for money laundering the Florida state comptroller announced withdrawal of BCCI licence to operate in the state. He got a strange letter from the Justice Department (Criminal Division of the Narcotics Section) in Washington "we are.. requesting that BCCI be permitted to operate in your jurisdiction with the understanding that certain accounts may be maintained by the bank at the request of the Department of Justice which would otherwise be closed to avoid legal and regulatory violations" The controller told Time Magazine (29th July 1991) "I was confused by what they wanted, when I asked them whether they wanted the bank to stay open for national security reasons they wouldn't give a clear answer." US Senate investigation committees met the same stonewalling from the Justice department. Colin Blum, chief investigator for the Kerry committee on drugs and organized crime told journalists that so complete was the obstruc tion to his activities from the Justice Department that "there is no question in my mind that it is a calculated effort inside the federal government to limit the investigation. The only issue is whether it is a result of high level corruption or if it is designed to hide illegal government activities".(Time Magazine 29th July 1991)
The fact, now widely known, was that the CIA and other US covert operations agencies were keeping accounts and slush funds in BCCI. Hence the reluctance of the US government to have BCCI too closely investigated. The bank played a crucial role in the operations directed by Col. Oliver North revealed in the 'Irangate' scandal. BCCI transferred the profits from the secret US arms sales to Iran to right wing Contra groups in Nicaragua. The Pakistan branch of the bank was meanwhile used by the CIA to channel funds to the Afghan mujahedeen.
It is not simply that the CIA and the drug runners use the same bank. The activities of the CIA and other US covert operations give direct material assistance to the narcotics trade. While the Bush administration in the US was organizing its 'war on drugs', Oliver North cynically admitted to Senate investigators in the Irangate hearings that he knew the aircraft and drop zones he had organized to ferry arms to the Contras were being used on the return trip to import massive quantities of cocaine into the US. In the same way, by setting up supply routes and a transportation structure to get US arms to the Afghan war lords fighting the Kabul regime, the CIA has linked the hitherto isolated opium growers in the area to the world heroin trade network, continuing its tradition of helping drug runners in South Vietnam and Laos in the 1960's and 70's.
BCCI played a key role in these developments. It was ideally placed, because of its world wide network of underworld connections, to serve world organized crime and US imperialism in the areas of the globe where these interests overlap. In this context an even more incredible, if true, aspect of BCCI operations concerns the alleged existence of an organized crime arm of the bank itself: a shadowy organization called 'the black network' which functions as a global intelligence network and a Mafia type enforcement squad operating out of the Karachi branch of BCCI with 1.500 employees and using sophisticated spy techniques and electronic surveillance along with bribery extortion and kidnapping. This clandestine outfit, it is said, runs a lucrative arms trade and transports drugs and gold. The network allegedly works with western and middle eastern intelligence agencies.
All good James Bond stuff. The end result however is the ruined lives of millions of drug addicts, the impoverishment of small businesses and the shoring up of US imperialism around the globe. The world wide operation of the 'criminal capitalism' of BCCI is a mirror image of the structure of 'legal' capitalism and illustrates above all else the need to build an organization based on the international working class as the only effective fight back against both varieties. As for the ruined small businesses and savers who were picketing the closed doors of BCCI branches from Bradford to Hong Kong, the only force that can help them is not the governor of the Bank of England or any other bank but the international working class.
John Lea
10 October 1991