The Bingham Report the Inquiry into the Supervision of BCCI records that the money-laundering indictment against BCCI arose from a United States undercover investigation known as Operation C-Chase, launched in May 1986. The operation involved US undercover agents placing themselves between the collection of proceeds from Colombian cocaine sales in the United States and the remittance of those funds to Colombian traffickers. According to the Report, a BCCI account in Florida was used to hold cash before its transfer to a BCCI account in Panama. Local BCCI officials later suggested more sophisticated arrangements for laundering the funds, involving BCCI accounts in Paris, Luxembourg and London.
Between 8 and 10 October 1988, seven BCCI officials were arrested in Tampa, Florida, on drug-trafficking and money-laundering charges. Other individuals connected with BCCI, including Nazir Chinoy, Asif Baakza and Ziauddin Akbar, were also arrested or surrendered to the authorities. These arrests attracted substantial adverse publicity in both the United States and the United Kingdom.
BCCI initially denied that its management or employees were involved in drug trafficking or money laundering, suggesting that the Bank had been targeted or entrapped. As the case developed, BCCI continued to maintain that senior management and UK management were not involved, and that any wrongdoing by employees resulted from inducement by undercover agents. The Bingham Report records that these explanations were, on the whole, received sympathetically by the Bank of England, the Luxembourg regulator and Price Waterhouse.
The immediate concern of the Bank of England was the risk that adverse publicity could lead to a run on deposits and threaten the stability of BCCI’s UK operations. The Bank therefore established arrangements to monitor the liquidity of BCCI’s UK Region closely. These included daily liquidity statements, weekly analyses of deposits and advances, weekly meetings with UK management, and restrictions on the UK Region’s funding of the rest of the Group.
Following the Tampa arrests, BCCI strengthened and reviewed its compliance procedures in the UK, the United States and elsewhere. In the UK, the review was conducted by independent lawyers, and suspect accounts were reported to the National Drugs Intelligence Unit. Bingham concluded that, whatever management’s motivation, the evidence strongly suggested that BCCI made a genuine and determined effort after Tampa to ensure future compliance with anti-money-laundering requirements.
In January 1990, when the Tampa trial was due to begin, the Bank of England and the Luxembourg regulator considered whether BCCI’s authorisation should be revoked if there was a conviction or guilty plea. Both regulators were reluctant to take that step unless the facts required it. They took into account the belief that the employees had been led into the scheme by undercover agents, that senior management and UK management were not implicated, and that BCCI had made genuine efforts to comply with international anti-money-laundering guidelines.
On 16 January 1990, the Bank of England learned that a plea-bargain agreement had been reached. Under the agreement, BCCI SA and BCCI Overseas pleaded guilty to substantive money-laundering offences and conspiracy. The United States Government dropped the cocaine-trafficking charges, and charges against BCCI Holdings and BCC Colombia were dismissed. BCCI SA and BCCI Overseas were not fined, but they forfeited US$14 million, representing the amount laundered with knowledge of what the funds represented. They were also placed under the control of the Federal Reserve for five years, subject to probation conditions.
After the convictions, the Bank of England’s Review Committee formally reviewed BCCI SA’s authorisation in the United Kingdom. The Committee considered the relevant statutory criteria, including capital adequacy, provisions, liquidity, systems and controls, fitness and properness, prudence, integrity and skill. It concluded that there were no sufficient grounds for revocation, although questions about capital adequacy and provisions remained open pending finalisation of the 1989 accounts.
