COLUMN LEFT/ ALEXANDER COCKBURN : Shady, Yes, but Not the Least Bit Unusual : Are we pretending that, unlike BCCI, Western banks don’t launder dirty money?
The lurid light now being cast on the affairs of the Bank of Credit and Commerce International is sending other bankers scuttling off into the shadows, mumbling about BCCI’s unwonted breaches of banking norms. A Bank of England official announced last week in the wake of the closure of most of BCCI’s operations that, at all costs, “Western banking standards and values have to be preserved.”
It’s certainly true that BCCI had a louche career, beginning with the 1970s. Agha Hasan Abedi, the Pakistani son of a cook for an aristocratic family in Lucknow, India, partly capitalized his bank in 1972 by issuing loans to the tune of $4 million from United Bank Ltd., where he was in charge of foreign operations, to associates who lodged the money in the Cayman Islands. Abedi then wrote the loans off as bad debts and BCCI was on its way.
Abedi and his publicists claimed that BCCI was all for the little guy, or for little countries in the Third World in whose interests BCCI would use its name to secure loans from the cruel First World.
But BCCI dealt with little guys the way most big financial institutions do. It took the deposits of poor folk such as Asian shopkeepers in the north of England and then lent to rich folk who either spent the money on themselves or hired right-wing folks to do Washington’s dirty work, and who rarely paid it back. As another Pakistani, Tariq Ali, who wrote the first detailed expose of BCCI back in 1981, remarked at the time in the New Statesman, Abedi’s aim was to build the Third World’s first multinational bank large enough to dominate most of the rickety states with which it might do business.
It all worked out as planned. Starting with a close relationship with the late President Zia Ul-Haq of Pakistan, BCCI became banker to Anastasio Somoza of Nicaragua. It had close dealings with the South Africans, with Gen. Manuel Noriega and the Medellin cartel. Most important of all, BCCI enjoyed the backing of oil princes, notably the sheik who rules Abu Dhabi.
Finally, long after BCCI’s raffish affairs had become the most open secret in international finance, the Bank of England called it a day, leading the charge that closed BCCI down earlier this month. The little guys went to the wall and the big fish swam off with the swag.
Next came the virtuous talk about “Western banking standards.”
The only way BCCI violated Western banking standards was by not being Western. Undoubtedly it laundered money. So have many banks of irreproachably Western provenance. A few years ago, a fairly junior New York executive of a major Irish bank told me that, at a seminar in New England, he’d asked a man sporting the name of a Boston bank on his lapel what he did. “Oh, I work in the laundering department,” was the breezy reply. Not long thereafter, the Boston bank pleaded guilty to just this offense.
Before he went off in the late 1980s to a federal penitentiary, a professional launderer named Ramon Milian Rodriguez talked about the “special representatives” at U.S. banks, among them the pillars of the financial world, whose job it was to deal with people like him. The “jumbo CDs” (for him, certificates of deposit worth $100 million each) he took out ensured every courtesy, including round-the-clock limo service and the finest hotels.
Among the clients of BCCI were the Nicaraguan Contras. The bank was the chosen conduit for cash mustered by agencies or nominees of the U.S. government. The CIA used BCCI to move money around, and its officials, when queried about the probity of BCCI and the nature of their relationship with it, were noncommittal until BCCI outlived its usefulness.
Spy agencies need shady banks like BCCI, but they also use reputable ones. Side by side with the BCCI news on the front page of the London Financial Times last Monday was a story about the Midland Bank, one of Britain’s largest. It turned out that Midland had an offshoot run by retired military officers whose brief was to finance arms sales, particularly to the Middle East and Asia. The offshoot unit may have lost Midland more than $150 million, greater damage than was done by its disastrous purchase of California’s Crocker Bank. Midland’s chief executive at the time says he knew nothing of this: “I don’t think it’s the sort of thing a chief executive should necessarily know about.” Or it seems, the bank’s shareholders.
So, amid all the tut-tutting about BCCI, it’s necessary to remember that Pakistanis have no monopoly on unsound banking practices; also that so long as there are illegal drugs there will be illegal drug profits, and so long as there are illegal drug profits there will be banks to wash them. The alternative is to keep the money under the bed, which is exactly what bankers were put on this Earth to prevent.
