In October 1988, BCCI and several of its officers became the subject of a major United States money-laundering prosecution arising from Operation C-Chase, an undercover investigation launched in 1986 into the laundering of proceeds from Colombian cocaine trafficking.
US undercover agents had infiltrated networks involved in moving drug proceeds and, during the investigation, transactions were carried out through BCCI accounts and officials. Seven BCCI officers were arrested in Tampa between 8 and 10 October 1988, with other individuals connected with the case arrested or surrendering subsequently.
BCCI's position was that the wrongdoing involved individual employees rather than senior or UK management, and that some of those involved had been induced into the transactions by undercover agents. At the time, this explanation was given considerable weight by the Bank of England, the Luxembourg supervisory authority and Price Waterhouse.
The Bank of England's immediate concern was also the risk that publicity surrounding the indictment could trigger a run on BCCI's UK deposits. It therefore increased monitoring of the Bank's liquidity and operations rather than taking immediate action against its UK authorisation.
The position changed significantly in January 1990. With the Tampa proceedings approaching trial, BCCI SA and BCCI Overseas pleaded guilty to substantive money-laundering offences and conspiracy. Under the plea agreement, cocaine-trafficking charges were dropped, the two BCCI entities forfeited approximately US$14 million, and they were placed on probation under Federal Reserve supervision for five years. No separate fine was imposed.
Following the guilty pleas, the Bank of England formally reconsidered BCCI's authorisation in the United Kingdom. Its Review Committee examined matters including capital adequacy, liquidity, systems and controls, prudence, integrity and management fitness. It concluded that there were insufficient grounds at that stage to revoke BCCI's authorisation, although questions concerning capital adequacy and provisions remained unresolved pending completion of the 1989 accounts.
The Tampa case became an important turning point in BCCI's regulatory history. It established corporate criminal liability for money laundering in the United States, while also raising wider questions about how far the misconduct extended within the Bank and whether the supervisory response was adequate.
Those questions continued after the 1990 settlement and became important subjects in the later Bingham Inquiry and US investigations into BCCI.