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THE BCCI AFFAIR

Thus, from early February on, the Federal Reserve did little if anything further to investigate the BCCI-First American relationship until the end of 1989. At that time, it learned -- informally -- from a Bank of England official that some of First American's shareholders had outstanding loans from BCCI, possibly secured by their stock in CCAH/First American. In response to this new information, the Federal Reserve in December, 1989 wrote Robert Altman, as CCAH's counsel, to again ask whether there were any loans by BCCI or its affiliates to any of CCAH's past or present shareholders, regardless of the purpose of the loan.(26) The questions asked of Altman by Ryback showed that the Federal Reserve was, whatever the failings of its investigations to date, fully focused on the central issue:

In connection with the application of Credit and Commerce American Holdings N.V. [CCAH] . . . a question was raised . . . whether any of the financing of the equity investment would be provided directly or indirectly by Bank of Credit and Commerce International S.A. (BCCI). It was indicated at the time that the individual investors had substantial funds and only a modest portion of the total investments would be financed. Further, any personal borrowing by the investors would come from financial institutions unaffiliated with BCCI.

It has come to our attention that at least some of the investors may have borrowed from BCCI. It may be that these borrowings were unconnected with the Financial General Bankshares transaction, but nevertheless were granted close to the time the acquisition was made. Some, if not all, of the borrowings may be secured by the stock of Financial General Bankshares. In order to clarify the situation it would be helpful if you would provide information on any loans extended to the original or subsequent investors, either directly or indirectly, by BCCI or any other affiliated organizations. This information should include all loans extended to the investors regardless of purpose, whether any of these loans are secured and if so, in what manner, and the date any loans were originally granted. It would also be useful to provide information on the repayment history of any such loans.(27)

True and honest answers to the questions asked by Ryback would have, of course, brought to an immediate end BCCI's secret ownership of First American, and commenced the kind of investigations which in fact began only one year later. Instead, Altman advised Ryback by telephone that he did not know the answers to Ryback's questions and had therefore contacted BCCI and CCAH's shareholders to ask them what they knew. Altman enclosed a letter from Naqvi and BCCI -- which according to later Federal Reserve charges Altman himself had drafted -- contending that the information requested was confidential and could not be released without the permission of the shareholders, which to date had not been granted. The Naqvi letter once again gave assurances that BCCI had not financed the original FGB acquisition, and through artful wording, sought to leave the impression, without so stating, that CCAH shares had been pledged against BCCI lending.(28) The Altman letter concluded by recharacterizing Ryback's broad, and detailed, request, in terms that would if accepted by the Federal Reserve, relieve Altman from the obligation of disclosing his own and Clark Clifford's prior loans from BCCI:

I shall, of course, press ahead with my request for the detailed information you wish to review, with my understanding that you primary interest is the current state of borrowings from BCCI by any of the First American investors, including any stock that may have ben pledge as collateral for loans.(29)

These artful dodges did not relieve the Federal Reserve's mounting anxieties that it might have been duped by BCCI. The Federal Reserve accordingly reached out again to the Justice Department and federal law enforcement.

On February 7, 1990, the Federal Reserve sent investigators to Tampa to meet with federal prosecutors, who were at the time in the midst of the trial of five BCCI officers who had been indicted in the Tampa case. The prosecutors said that while rumors of the BCCI-CCAH relationship abounded, they had investigated them and found no evidence to substantiate them.(30) This position was then confirmed by IRS agents, including Burris. The agents told the Federal Reserve that they wrote a report to the grand jury setting out the facts, which they would be glad to provide to the Federal Reserve, and that they had an informant who could also provide further information on the issue. Following the meeting, the Federal Reserve investigator was told by a Tampa prosecutor that the report contained no relevant information, and therefore would not be provided. The Federal Reserve persisted in requesting the report, and the Tampa prosecutor, for reasons not explained, continued to refuse to cooperate by providing it. In the meantime, the investigator tried repeatedly to talk to the informant, and was told by the informant's wife that the informant was out of the country.(31)

Thus, when the Federal Reserve finally went to federal law enforcement in search of information, the information it was given was either of little help, or actually incorrect. Instead of cooperating with the Federal Reserve, the Tampa prosecutor actually refused to provide requested information.

The Federal Reserve also reached out, with equal lack of success, to the Bank of England. It asked the Bank of England to provide it with more information about the nature of BCCI's lending to CCAH shareholders. In return, the Bank of England advised the Federal Reserve "that it had encountered difficulties in obtaining the necessary information but would continue its investigation."(32)

The previous December, the Bank of England had provided the Federal Reserve with an important warning about BCCI's lending to First American. But since then, the Bank of England itself had been drawn into BCCI's troubles as a result of Price Waterhouse advising it of the massive losses at BCCI and Price Waterhouse's own unwillingness to sign off on further audits of the bank. Thus, the Bank of England was now struggling with the problem of how to prevent BCCI from collapsing entirely, how to work out agreements with Abu Dhabi to guarantee BCCI's losses, and how to keep knowledge of the depth of BCCI's troubles from becoming public. By the spring of 1990, its own perceived vital interests were at stake. Accordingly, the Bank of England chose to be less than completely candid with the Federal Reserve about what it knew. If it had told the Federal Reserve that BCCI had $850 million in lending secured by CCAH's shares, the result would have been the instantaneous action that the Federal Reserve ultimately took the following January, just weeks after it finally saw the Price Waterhouse audits that the Bank of England withheld from it earlier in the year.

Despite its investigatory efforts, from the spring of 1990 through November, 1990, the Federal Reserve made little progress on the BCCI-First American issue. The Justice Department had given it almost nothing. The Bank of England had given it almost nothing. Both were in fact, for differing reasons, withholding important information from the Federal Reserve. At last, in November, the New York District Attorney's office gave the Federal Reserve the information it needed to break the investigation open. As Mattingly testified:

In November 1990, the New York County District Attorney's Office informed Federal Reserve staff that a confidential source had stated that a report prepared in October 1990 by BCCI's outside auditors indicated that BCCI had made substantial loans to CCAH shareholders secured by CCAH shares. Board staff immediately requested access to this report from the United States General Manager of BCCI. After a delay occasioned by the initial refusal of the auditor [Price Waterhouse] to permit the report to be examined by the Federal Reserve, BCCI agreed to make the report available for review by a senior member of the Board's examination staff in BCCI's London office. The review was conducted on December 10, 1990. The auditor's report and a conversation on that date with the new chief executive officer of BCCI [Zafar Iqbal] indicated that BCCI had substantial loans outstanding secured by CCAH stock. This was the first substantive evidence received by the Board confirming a financial relationship between BCCI and CCAH.(33)

Eleven days after this event, the Federal Reserve was contacted by counsel for the Abu Dhabi shareholders of BCCI and First American, Patton, Boggs & Blow, who advised the regulators that Abu Dhabi had the previous April become BCCI's new majority shareholders, and had invested "a very large sum in BCCI stock to correct certain capital deficiencies." The lawyers for Abu Dhabi confirmed that "a substantial amount of the stock of CCAH had been pledged to BCCI as collateral for hundreds of millions of dollars in loans to certain shareholders of CCAH," and suggested that Patton, Boggs, instead of Clifford and Altman, would now be coordinating the handling of issues pertaining to CCAH with the regulators.(34)

Two weeks later, the Federal Reserve initiated its formal investigation, including the authorization of full discovery power, into the circumstances of BCCI's acquisition of control of CCAH and whether false or misleading statements had been made to the Board during the application process in 1981 and afterwards. Two weeks later, Patton Boggs acknowledged that there was material in BCCI's files concerning nominee arrangements for some of the CCAH shareholders. One week later, on January 22, 1991, the Federal Reserve sent a proposed cease and desist order to BCCI's counsel and made criminal referrals to the Justice Department.(35)

Federal Reserve Actions, 1991-1992

Having decided at last to place all the resources at its disposal to investigating BCCI's activities in the United States, the Federal Reserve put together a team of attorneys, examiners and investigators to conduct a comprehensive investigation of BCCI.

In Washington, the Board of Governors of the Federal Reserve swiftly reached consent decrees with BCCI and CCAH on March 4, 1991, requiring BCCI to divest itself of any interest it had in CCAH, and prohibiting transactions between BCCI and CCAH except as specifically approved by the Federal Reserve, and requiring BCCI to submit a plan to the Federal Reserve under which it would cease all banking operations in the United States.

At the same time, the Federal Reserve devoted its primary attention to severing First American from BCCI, and trying to stave off its collapse. When the Federal Reserve and other U.S. regulators ultimately did undertake a systematic review of BCCI's relationship with its secretly-held U.S. subsidiaries, they found evidence that BCCI had directed First American's decisions at the holding company level, including in connection with First American's costly decision to open offices in New York City and its even more costly decision to purchase the National Bank of Georgia.(36) But the regulators found only limited evidence that BCCI, its shareholders, or customers had received preferential treatment from First American. Thus, in a sense, BCCI had made only limited use of the asset it had bought. With certain exceptions pertaining to First American's deposits of funds in BCCI's Grand Caymans affiliate, ICIC, First American had been collected as an asset to be held for a rainy day, rather than as an asset to be immediately raided. First American was BCCI's piggy-bank, not BCCI's dust-bin bank, its place to deposit resources created elsewhere.

Nevertheless, First American also had serious financial problems, due in large part to its over-reliance on real estate and agricultural lending, similar to that of other banks in the metropolitan Washington region, that had now turned sour. These problems were now being exacerbated by the bad publicity First American was receiving in connection with its ownership by BCCI. Normal forms of recapitalization were no longer available to First American. It could not call on its nominee shareholders to pump in more funds. Nor could BCCI itself add new funding to First American. Nor would any "white knight" be able to come in and purchase the bank at any price until many more of the legal problems pertaining to its ownership were resolved. Apart from the Federal Reserve's own discount window, the only possible place to turn was Abu Dhabi. Accordingly, the Federal Reserve began negotiations with Patton, Boggs and Blow to determine the degree to which the Abu Dhabi shareholders of CCAH/First American were willing to help the Federal Reserve preserve the value of their investment -- which would disappear entirely in the event of a First American collapse. Thus, both Abu Dhabi and the Federal Reserve during the first half of 1991 had substantial incentives to cooperate with one another. Abu Dhabi needed to find ways to avoid the closure of BCCI globally, a closure which the Federal Reserve had the potential of forcing. The Federal Reserve needed Abu Dhabi's money.

Squeezed out of this equation was the ability of the Federal Reserve to find out the full story -- including the issue of the precise role Abu Dhabi had played in the original FGB takeover, and subsequently. Obviously, it would not be possible for the Federal Reserve to insist on full and complete disclosure by Abu Dhabi with the same vigor that it was insisting on disclosure by other shareholders, and at the same ask Abu Dhabi to place its cash into First American. The result was that the Federal Reserve and Abu Dhabi entered into a period of cooperation for the purpose of saving First American that in its way, was no different from the same kind of cooperation the Bank of England was getting from Abu Dhabi in Abu Dhabi's attempt to save BCCI. In return for Abu Dhabi giving the regulators money, the regulators would accept Abu Dhabi's assurances of innocence, at least for the time being.

In mid-March, the Federal Reserve sent two experienced investigators, Richard Small in Washington and Thomas Baxter in New York, to Abu Dhabi, where they requested the Abu Dhabi authorities to provide them with all relevant documents pertaining to BCCI's activities in the United States. Abu Dhabi would not grant Small and Baxter direct access to BCCI's files. Instead, they agreed to arrange the transport of particular categories of files, as designated by Small and Baxter, to a suite in the hotel in which they were staying in Abu Dhabi. This arrangement successfully produced vital documents concerning nominee arrangements between BCCI and all of the non-Abu Dhabi shareholders of CCAH. It was never likely to, and did not in practice, result in the provision to the Federal Reserve of useful material concerning Abu Dhabi's relations with BCCI.

Despite its need for funds for First American, the Federal Reserve did take a strong position with British regulators concerning the need for BCCI to be totally reformed if it were to continue in any form. In the weeks prior to BCCI's closing, Federal Reserve investigators, including Small and Baxter, lobbied the Bank of England aggressively on the issue of BCCI being permitted to restructure with any of its former officers remaining in charge of the bank, including the new head, Zafar Iqbal, installed by Abu Dhabi. In part as a result of the Federal Reserve's lobbying, the Bank of England in turn advised Abu Dhabi of the need to remove Iqbal, which in turn lead to a temporary stalemate over the proposed restructuring of BCCI, until the Bank of England ended the issue, and the bank itself, with its order closing BCCI of July 5, 1991.

Following BCCI's closure, the Federal Reserve worked with outside members of the First American board of directors such as former Maryland Senator Charles Mac Mathias, to force Clifford and Altman out of their roles as chairman and president of First American, and working with other bank regulators, closely monitored First American for signs of a run on the bank, and proceeded to a series of enforcement actions, including an assessment on July 29, 1991 of a $200 million fine against BCCI, a $37 million fine against BCCI nominee Ghaith Pharaon, a $20 million fine against BCCI official Kemal Shoaib, and the commencement of civil enforcement proceedings against Clifford and Altman, and together with the Justice Department and New York District Attorney Morgenthau, a plea agreement on December 17, 1991 by BCCI's liquidators that forfeited some $500 million of BCCI assets in the U.S., together with a complex, asset sharing agreement designed to protect both U.S. interests and assist innocent BCCI depositors and creditors abroad.(37)

The Federal Reserve's summaries of charges accompanying the various enforcement actions have collectively amounted to several hundred pages of detailed, precise information on how, when, and by whom, the Federal Reserve was lied to in connection with BCCI's activities in the United States. These summaries leave little doubt as to what happened on the matters they cover. They demonstrate clearly the very substantial investigatory and legal capabilities placed by the Federal Reserve into the BCCI investigation since January 3, 1991, and collectively provide the most complete account to date of what took place concerning BCCI's activities in the United States.(38)

At the same time, the Federal Reserve has adroitly, if not always swiftly, handled the complexities of severing First American from BCCI. Untangling BCCI's ownership of CCAH was a lawyer's nightmare, and without resorting to the regulatory takeover of First American some believed inevitable, the Federal Reserve now appears to have taken First American from the brink of extinction to long-term survival. While First American did lose several billion dollars in deposits and was severely weakened by the bad publicity surrounding BCCI's closure, buffered by the $190 million obtained from Abu Dhabi, it has, to date, appeared to weather the storm. After extensive and protracted negotiations, the CCAH shareholders placed their shares of CCAH into a trust and an independent trustee was appointed, shortly before the Subcommittee's final hearing, on July 30, 1992. Various First American assets, including its Georgia, Florida and Tennessee operations, have been sold off, and the sale of the metropolitan Washington operations to another bank is anticipated to occur by the end of 1992.

Throughout this period, the Federal Reserve and Abu Dhabi have sought to retain a cordial relationship, deferring problem areas in order to permit the sale of First American to go forward, with Abu Dhabi continuing to provide some, albeit limited, assistance to the Federal Reserve concerning some formerly privileged BCCI documents held in Abu Dhabi, and with the Federal Reserve remaining unaccountably "hopeful" that it will in time gain access to the top BCCI officers still held under house arrest in Abu Dhabi.(39)

Obstacles to Completing Federal Reserve Investigations

While the Federal Reserve made profound progress in investigating BCCI during 1991 and 1992, substantial obstacles have remained to the Federal Reserve's ability to complete its investigation. As noted above, eighteen key witnesses and many key BCCI documents have remained held in Abu Dhabi and unable to any U.S. investigator to date. Foreign bank secrecy laws have also continued to hinder the Federal Reserve's ability to get information it requires, especially in Luxembourg and France.(40) The Federal Reserve has yet to be able to interview key participants in BCCI's frauds in the United States, including former Saudi intelligence liaison and BCCI front-man Abdul Raouf Khalil, former head of Kuwaiti Airlines and BCCI front-man Faisal al Fulaij. And the Federal Reserve has been prevented from interviewing certain witnesses and reviewing certain documents in the United Kingdom by the British Serious Fraud Office.(41) While all of these issues remain a problem, the most serious of them remains Abu Dhabi's refusal to provide access to the documents and witnesses it controls. As Mattingly testified:

Senator, I think it is absolutely imperative that the Federal Reserve and Mr. Morgenthau and the Justice Department have access to BCCI employees in Abu Dhabi, and that we also have access to all of the documents of BCCI that are in Abu Dhabi.(42)

Until such access is provided, the Federal Reserve's investigations of BCCI cannot be said to be complete.

Federal Deposit Insurance Corporation (FDIC) And Independence Bank

On January 30, 1992, the FDIC was forced to close the Independence bank of Encino California, held by Ghaith Pharaon as a nominee for BCCI, at a cost to the bank insurance fund of an estimated $130 million to $140 million.(43) The action took place just weeks after $5 million was injected into the bank by BCCI's liquidators one week after they had entered a guilty plea with the Justice Department and District Attorney Morgenthau on the bank's criminal indictments. The Independence Banks's closure, so soon after the final cash infusion, suggests just how far the bank had fallen by the time the regulators stepped in.

In fact, U.S. regulators were essentially oblivious to BCCI's ownership of the Independence Bank, and consistently underestimated the financial damage done to the Independence Bank by the management put into place there by BCCI, until the spring of 1991. The reasons for this are not entirely clear. The FDIC was aware of Pharaon's reported 15 percent ownership of BCCI and his borrowing relationship with BCCI, and aware that the person selected by Pharaon to chair Independence Bank, Kemal Shoaib, was a former officer of BCCI. There are two likely explanations for the FDIC's failures. First, the Independence Bank was a state chartered bank, and a non-member of the FDIC, whose principal regulator was the California State Superintendent of Banks, only secondarily backed up by the FDIC. Thus, the FDIC's monitoring of the Independence Bank was less rigorous than it would be if the FDIC were the primary regulator. Second, the FDIC had not been the decision maker in connection with the FGB take over, as was the Federal Reserve, or the decision maker in connection with Pharaon's take over of the National Bank of Georgia, as was the OCC. Accordingly, it had no reason to recognize the pattern that had emerged of BCCI's use of nominees to buy U.S. banks.(44)

Pharaon's purchase of the Independence Bank in 1985 had shown the usual pattern of BCCI. He filed documents showing that he would be financing 40 percent of the purchase himself, with the remaining 60 percent coming from a domestic bank, whose cooperation BCCI had secured through guarantees from BCCI which were not disclosed to the FDIC.(45) A routine background check of Pharaon was conducted, including requests for comment from the FBI, Customs Service, CIA, INTERPOL, and other regulatory agencies. No adverse information about Pharaon was uncovered by the background checks.(46)

Most interesting about the lack of information was the response by the CIA, which knew at the time of the FDIC's request that BCCI had engaged on a nationwide strategy of acquiring U.S. banks and had by the time of the FDIC request for comment already created a memorandum describing this strategy that it had provided to Treasury Secretary Donald Regan and to Robert Bench at the OCC. What appears to have happened is that the CIA was either unaware of Pharaon's connection to BCCI, or had failed to cross-reference its information about BCCI with Pharaon's name.(47)

After Pharaon purchased the Independence Bank, the condition of the bank was monitored regularly by state and FDIC examiners, and for the next three years, the State banking department conducted gave the bank a composite 2 rating on a scale of five, with 1 being the highest possible rating. This indicated the regulators' view that the Independence Bank was in strong, although not outstanding, financial condition. In mid-1988, this was downgraded to a 3 rating based on the bank's rapid growth and changing asset mix. An on-site examination by the state banking department and the FDIC a few months later downgraded this rating to a 4, indicating that the bank had, in the regulators' view, suddenly developed rather serious problems.(48)

As FDIC enforcement chief Stone testified:

This examination in 1988 marked a turning point for Independence Bank. From 1988, FDIC examiners became increasing concerned and alerted to problems at the bank. The examination report disclosed heavy asset classifications, low capital, weak earnings, thin liquidity, poor underwriting policies and inadequate record keeping and internal controls. Growth had been uncontrolled since mid-1987 and had been concentrated in joint venture real estate investments permitted under California law.

Mr. Shoaib had embarked on a program of investing in joint ventures involving acquisition, development and construction of real estate projects, primarily in southern California. In 1988, FDIC examiners discovered improper account of these projects which resulted in the understatement of total assets and liabilities, and the overstatement of the bank's capital.(49)

While the FDIC took the position that these problems had developed rather suddenly at the Independence Bank, in fact, as Senator Kerry suggested to the FDIC, "a bank does not accumulate" such problems overnight. Stone acknowledged that on detailed examination, the FDIC found that "file documentation was horrible," and that there had been "outright misrepresentation[s] by bank officials during [a] previous examination."(50)

Moreover, the Independence Bank had also begun to earn substantial fees -- $4 million in 1990 alone -- on transaction involving the swapping and restructuring of Third World debt. This was an area that Pharaon had used to his advantage in Argentina, as a result of personal relationships with high Argentine officials, including Argentine central bankers, to engage in transactions with BCCI in that country which were questionable at best.(51) Although the FDIC did not recognize this practice as pertaining to BCCI, it believed it completely inappropriate for a small, state-chartered bank and ordered the practice halted.(52)

Thus, once again, BCCI had successfully taken over a U.S. bank, and in this case actually brought BCCI's own typical practices to bear on the bank, under the nose of regulators who did not recognize what was happening. In the case of the Independence Bank, however, the FDIC did move to try to solve its problems from late 1988 on, through requiring further capital infusions from Ghaith Pharaon, and the resignation of Kemal Shoaib, the former BCCI officer, from his position as head of the bank in January, 1989.

At the same time, the FDIC sought to investigate whether the Independence Bank's ties to BCCI meant that it was engaged in money laundering. It found no systematic money laundering, but a few suspicions customer transaction which it then brought to the FBI. It did not, however, suspect that BCCI might have used Pharaon as a nominee and did not investigate that possibility.(53) It did, however, require Pharaon over the next two and a half years to inject some $46 million in new capital into the bank as the price for avoiding action by the regulators. In April, 1991, Pharaon, then under active investigation by District Attorney Morgenthau and the Federal Reserve, refused to inject any further capital into Independence, placing the bank's survival in doubt. Regulators installed examiners at the bank, looked to the royal family of Abu Dhabi as a source of capital, who refused to assist, considered a sale of the bank, and sought funds from BCCI and then its liquidators in an effort to prevent its collapse. However, it deteriorated rapidly, especially following the bad publicity due to revelations that it had been secretly owned by BCCI, and on January 30, 1991 was closed at the loss of $130 million to $140 million to the bank insurance fund.

In summary, BCCI's purchase of the Independence Bank demonstrated both the weaknesses and the strengths of the U.S. regulatory system. BCCI easily purchased a state bank in California through a nominee, attracting little notice, and using simple devices available to anyone with financial resources and willing to lie to regulators. While its ownership was never caught by examiners, the negative consequences of its ownership were, after about three years, and from there on, the examiners placed very significant pressure on the BCCI nominee, Pharaon, to force the bank to comply with U.S. standards and regulations.

Lessons Learned And Analysis of Foreign Bank Supervision Enhancement Act of 1991

The Federal Reserve acted swiftly in the wake of the development of the BCCI scandal in the spring of 1991 to write legislation, then introduced by the chairman and ranking member of the Senate Banking Committee, and the chairman of the Subcommittee, to enhance its supervision of foreign banks. That legislation swiftly passed the Congress in 1991, and is already being implemented by the Federal Reserve. The new law:

** Bars entry of any foreign bank into the U.S. unless it is subject to consolidated home country supervision and agrees to permit supervisory access to any information regarding it that the regulators want.

** Applies to foreign banks the same financial, managerial and operational standards governing U.S. banks.

** Grants specific authority to federal regulators to terminate the U.S. activities of any foreign bank that is engaging in illegal, unsafe, or unsound practices.

** Grants the Federal Reserve authority to examine any office of a foreign bank in the U.S.(54)

The new law filled many of the regulatory gaps specifically applicable to the BCCI case, but at least three broad problems remain:

WEAK FOREIGN REGULATORS. While the new foreign bank supervision law does prohibit banks without a central regulator from entering the U.S., it not does prohibit banks which are regulated in bank regulatory havens, such as Grand Caymans, Luxembourg, or, for that matter, any of the significant number of tiny nations who seek to attract business through offering lax regulatory standards and stringent bank secrecy laws. If BCCI had been based solely in the Grand Caymans, it might not have been able to maintain its deceptions as long once they were uncovered, but penetrating those deceptions in the first place would have just as difficult. The Federal Reserve needs to consider whether it is appropriate to deny access for a foreign bank to engage in activities in the U.S. if it is based in a country that does not certain essential standards for banking regulation.

FOREIGN BANK SECRECY LAWS. Criminals use bank secrecy laws to commit crimes. As the BCCI case demonstrates, even after those crimes have been discovered, foreign bank secrecy laws substantially interfere with legitimate U.S. law enforcement and bank regulatory interests in determining what went and who committed the illicit activity. The Foreign Bank Supervision Enhancement act substantially improved the Federal Reserve's ability to secure information directly from foreign banks doing business in the U.S., as a condition for their participation in the U.S. market. However, vital information pertaining to the activities of those banks may be in the possession of individuals or institutions other than banks not directly subject to the Federal Reserve's jurisdiction. For example, if BCCI had wired funds to a foreign bank, based in a bank secrecy haven, that did not do business in the U.S., the provisions in the Foreign Bank Supervision Enhancement Act would be of no help in obtaining the needed information. The Federal Reserve needs to consider whether it is appropriate to press for broader changes in bank confidentiality laws by foreign countries, beginning with the United Kingdom.

COORDINATION AMONG BANK REGULATORS. Regulation of U.S. banks has become a remarkably complex web, with bank examiners working for the Federal Reserve, the Office of the Comptroller of the Currency, the FDIC, and the Office of Thrift Supervision, at the Federal level, and approximately 52 additional regulators at the state level. It is inevitable under the circumstances that there are failures to communication, cooperation, and coordination among these differing agencies. At numerous, critical times in the BCCI case, information available to one regulator was not passed on to another regulator. The Federal Reserve needs to consider whether it is an appropriate use of regulatory resources to create some form of central federal banking data base regarding every financial institution regulated in any form by the federal government. Such a data base could compile application forms, bank examination reports, audits, correspondence, and other data for the use of all federal regulators which otherwise would remain segregated and scattered at each individual agency.

THE BANK OF ENGLAND

Background: BCCI in the United Kingdom

Although BCCI was chartered in Luxembourg and the Grand Caymans, its real home through most of its existence was the United Kingdom, where Abedi established BCCI's headquarters, and the senior BCCI officers made key decisions for BCCI's operations world-wide.

Abedi's choice for a world headquarters in London's financial district, "The City," made sense in the early days of the petrodollar boom. At the time, London was a favored vacation and shopping destination for oil-rich Middle Easterners, and BCCI needed to serve them. London was in any case one of the world's great banking centers. And yet, the location of BCCI's in the United Kingdom also created difficulties for the bank. For one thing, the British banking system viewed BCCI with suspicion and hostility from the beginning, because BCCI was not regulated in the United Kingdom, was managed by Pakistanis, and was therefore, as Abedi's put it, "outside the club."(55)

Despite the hostility shown towards BCCI by the British banking system, the actual jurisdiction over BCCI by the Bank of England was distinctly limited. Because BCCI was chartered in Luxembourg and the Grand Caymans, the Bank of England considered them to be the "lead regulators," and itself to have only a secondary role under British banking laws. This reduced the level of scrutiny imposed on BCCI by the Bank of England, even as British bank secrecy and confidentiality laws combined to impede the ability of any other regulator to penetrate BCCI's activities in the United Kingdom, where it was headquartered, and did all of its essential business.

Thus, in making the UK its actual headquarters, while keeping its charters in Luxembourg and the Grand Caymans, BCCI effectively fractured oversight by each of the regulators to a mere part of its operations, and frustrated consolidated oversight by anyone. At the same time, concern over this arrangement in the UK prompted repeated attempts by the British to curtail BCCI's activities, which proved to have relatively little effect.

Early Warning Signals

BCCI's problems in the United Kingdom were notorious and public by mid-1978, as contemporaneous press accounts, describing the frigid response of British authorities to BCCI's expansion, demonstrate.(56) As the House of Commons Treasury and Civil Service Committee concluded following its investigation of BCCI:

The evidence we have received makes it quite clear that the Bank of England was well aware that there were problems at BCCI even as far back as the 1970s. The Governor told us: "I cannot say I was happy or, indeed, any of us have been particularly happy about having these branches in the UK. It has been the most difficult bank we have had to deal with." [As another bank regulator testified] "We had no shortage, if I may use that term, of allegations and accusations . . . about BCCI."(57)

BCCI's inherent problems in the UK were exacerbated by BCCI's over-rapid expansion, from four offices in the United Kingdom in 1973, to 45 offices four years later. The depth of the problems had already become clear by 1976, when BCCI still had not received the authority from the Bank of England to engage in full banking services in the UK. By 1978, the UK regulators were taking still more aggressive action against BCCI -- blocking the bank from being permitted to engage in any further expansion through branching, in order to "bring greater transparency to the operations of BCCI in the UK," and thus enable regulators to analyze just what BCCI was doing.(58) In 1980, the Bank of England turned down BCCI's request for recognized status under the Banking Act of 1979, limited it only to be a licensed deposit taker in the UK.(59)

Having taken these steps to limit BCCI's activities in the UK, the Bank of England did not seek to investigate BCCI further, or encourage others to do so. Instead, it sought to limit its own involvement in bearing responsibility over BCCI.

For example, in 1985, Luxembourg regulators, increasingly uncomfortable with their inability to oversee BCCI's activities, suggested that BCCI be required by the Bank of England to establish a separately incorporated entity in the UK that would enable the Bank of England to become the lead regulator. The Bank of England's response to the Luxembourg overture was to discourage it.(60) As Brian Quinn, executive director of the Bank of England, testified before the House of Commons, the Bank of England rejected Luxembourg's offer because:

You become lead regulator of an organisation you believe you can regulate.(61)

Prodded by the continuing rumors and allegations about BCCI, on December 4, 1985, the Bank of England decided that it would be appropriate for it to visit BCCI's Central Treasury offices in London, in what was apparently the first time the Bank of England had sought such an examination. Its examiners met with BCCI directors and officers, and after spending a week in the bank reached some startling conclusions. As one Bank of England official wrote in an internal memorandum:

1. After spending one week in BCCI, I am absolutely certain that the real head office is located on six floors of 100 Leadenhall Street. It is here that Abedi, Naqvi, Twitchin, Farqui et al work 12 hours a day managing assets of $15bn. . . . .

2. It is clear that Luxembourg is an historic chapter in the BCCI story and that Grand Cayman is a tax haven used as a booking centre. The Bank of England are effectively the prime supervisors of BCCI, not the IML [the Luxembourg Monetary Institute]. UK incorporation of the UK branch network followed by recognition must be traded with Abedi in exchange for the movement out of Leadenhall Street of the Central Support Organisation.(62)

From this memorandum, it appears that not until the end of 1985 did the Bank of England even understand that BCCI's headquarters was located in London. When it did, its first reaction was not to decide to upgrade its regulation of BCCI, but to consider trading upgraded status for BCCI's deposit taking in the UK in exchange for BCCI's agreement to move its headquarters out of the UK to the Bank of England would not have to regulate it.

In this same period, the Bank of England learned of BCCI's huge Treasury losses, which had nearly wiped out BCCI's capital, and did not object when BCCI moved its Treasury operations out of London to Abu Dhabi.

Formation of the BCCI College of Regulators

But a larger solution to the BCCI problem was still required, and the problem was considered sufficiently severed to require a structural response. After the Luxembourg Monetary Institute found itself unable to convince anyone else to take over the responsibility of monitoring BCCI's activities that were beyond its capabilities -- especially with BCCI's most important records now held in London and Abu Dhabi -- Luxembourg began to press for the formation of a College of Regulators to regulate BCCI. As Luxembourg had explained it, the Basle Concordat signed in May 1983 by many of the European banking regulators established a provision to permit a "college of regulators" to be set up to regulate banks that otherwise would escape regulation. While it was recognized that such a college was a second best approach after supervision on a consolidated basis," it was a lot better than the existing situation, in which Luxembourg did not even have the right to obtain BCCI's records in the UK. As Luxembourg described it, the college was the only solution available to Luxembourg to exercise supervision "over a group 98 per cent of whose activities feel outside its jurisdiction and for which none of the other banking supervisory authorities involved was prepared to take responsibility as parent authority."(63)

The British authorities, as well as Luxembourg, recognized that the college was not an ideal solution, because it perpetuated a problem that had been recurrent in the handling BCCI internationally: each nation focused on its own domestic concerns, and refused to accept full responsibility for BCCI's overall activities.(64)

The College was also, as might be expected of a newly created bureaucratic entity, slow to develop. Its was not formed until 1987. Its first meeting did not take place under April of 1988. At that meeting, which took place in Luxembourg, the regulators met with four BCCI officials and three partners of Price Waterhouse and discussed BCCI's large loan exposures. These consisted of the massive lending to CCAH shareholders for shares of First American; massive lending to BCCI shareholders such as Ghaith Pharaon and Kamal Adham; massive lending to the Gokal brothers; and other large loans which later were shown to be to nominees. As Lord Justice Bingham found:

Reference was made to the large loan exposures, but these were not examined in detail. . . The management were not taxed as to when and how these loans were to be reduced and no plan or timetable was sought. . . There was a brief and inconclusive discussion of CCAH which, according to the IML note of the meeting, had "to be seen as BCCI's steeping stone to set up in the US." . . . The meeting ended with a consideration of the College's enlargement to include Hong Kong, the Caymans and perhaps the United States and some Middle Eastern authorities. Naqvi was opposed to this. A College of that size, he argued, would be unmanageable. He wanted the group to be supervised on a consolidated basis by one supervisor and wanted the group to be restructured with that end in mind.(65)

The last thing that BCCI's top officials wanted was for the U.S. to participate with foreign regulators in overseeing its activities. As Naqvi knew, the moment the Federal Reserve knew of its massive loans for shares of CCAH, BCCI would be on a swift road to being forced out of the United States, and perhaps out of existence entirely.

What is remarkable about the summary of the meeting is the casual manner in which the regulators were approaching BCCI's problems. They saw massive outstanding lending that was not being serviced, and yet failed to recommend, let alone insist upon, any serious effort to correct the situation. Instead, they considered further additions in membership to the college, in what was in retrospect a further attempt to avoid having to take on the responsibility for overseeing BCCI themselves.

In later meetings of the college, discussions continued among BCCI, its auditors, and its regulators, concerning the need for BCCI to put aside additional funds as provisions against country risk, due to BCCI's very large lending to Nigeria -- some $260 million in all -- and its smaller, but still substantial exposure in countries like the Philippines, Zambia, and Sudan.(66)

In the spring of 1989, the college regulators listened to Price Waterhouse express its concerns about BCCI's continued high concentration of lending. Price Waterhouse also told the regulators that some of the largest borrowers were not paying interest on loans, let alone principal when due, and there was evidence that funds had been "drawn down" by BCCI without its central credit committee having provided prior approval. Yet in response, neither the Luxembourg regulators nor the Bank of England suggested that anything in particular be done, and accordingly, Price Waterhouse once again signed off on its audits, again certifying them to be a true and fair representation of BCCI's financial condition.(67)

By the end of 1989, the college regulators were placing increasing pressure on BCCI to reform, in concert with Price Waterhouse. In early 1990, Price Waterhouse informed the Bank of England that it now was confident that top BCCI officials had provided false information to it, and that there was fraud at BCCI, in an amount that was yet to be determined. The problem that the college regulators and the auditors had been slowly trying to come to grips with over the previous three years had accelerated, and action had to be taken.

The April 1990 Price Waterhouse Report

On April 18, 1990, Price Waterhouse provided a report to the Bank of England which stated that a number of financial transactions at BCCI booked in its Grand Caymans affiliates and other offshore banks were "false and deceitful," and that it was impossible at the present time to determine just how far the fraud reached. Thus, a critical decision had to be made. Either BCCI had to be closed down now, or the Bank of England itself had to give its assent to keeping it open in some new form as a means of avoiding losses to BCCI's million or more depositors. New management needed to be installed. New financing had to be found, and the holes in BCCI's books had to be plugged.

The obvious solution was to ask Sheikh Zayed and the government of Abu Dhabi to take over the bank. As Zayed and the Al Nayhan family who ruled Abu Dhabi had been major depositors of BCCI, and had long had billions in family finances handled by BCCI, they stood to lose as much as anyone if the bank collapsed. Accordingly, Abu Dhabi would have to be told the truth about BCCI's perilous condition, and asked to commit funds to keeping the bank solvent.

A series of urgent meetings were held in Abu Dhabi and Luxembourg, beginning in March, 1990, in which Naqvi confessed his errors and resigned from his position as CEO at BCCI. Abu Dhabi agreed to provide a $1.2 billion cash infusion to BCCI, and to guarantee its losses. Naqvi was removed to Abu Dhabi, and a new management team was brought in. Best of all, from the point of view of the Bank of England, Abu Dhabi and BCCI had agreed to remove BCCI from its headquarters in London, a goal that the Bank of England had been seeking for years.

Rather than increase its jurisdiction over BCCI at this critical time, the Bank of England was increasingly anxious to make it someone else's problem. Abu Dhabi seemed only too glad to comply, and accordingly, the Bank of England gave its blessing to the removal not only of BCCI's headquarters, but its officers, and most importantly, all of its records, from British jurisdiction to that of Abu Dhabi.

At the same time, the Bank of England met with Price Waterhouse, which wanted to know the Bank of England's position concerning whether or not it should once again sign off on BCCI's books, despite the fraud which now the Bank of England, the Luxembourg regulators, and Abu Dhabi knew about in addition to Price Waterhouse and BCCI. The Bank of England and the Institut Monetaire Luxembourgeois, informed of what the auditors termed "all the uncertainties known to Price Waterhouse and of the financial support commitment by the Government of Abu Dhabi," agreed that BCCI could continue to operate, and Price Waterhouse duly signed off on BCCI's books.(68)

By agreement, the Bank of England had in effect entered into a plan with BCCI, Abu Dhabi and Price Waterhouse in which they would each keep the true state of affairs at BCCI secret in return for cooperation with one another in trying to restructure the bank to avoid a catastrophic multi-billion dollar collapse. From April 1990 forward, the Bank of England had now inadvertently become partner to a cover-up of BCCI's criminality. The goal was not to ignore BCCI's wrongdoing, but to prevent its disclosure, for that in turn could cause a massive run on the bank, BCCI's collapse, and potential billions in losses.

As the Governor of the Bank of England, Robin Leigh-Pemberton, testified before the House of Commons Treasury and Civil Service Committee:

On receipt of both the [Price Waterhouse] report of April 1990 and October 1990 we were alerted to [fraud and deceit], but those phrases described what I call the state of evidence, namely there was an indication that certainly things were not well. Some transactions had been either false or deceitful . . . but our view was that even if this added up to individual acts of fraudulent conduct it did not give evidence of a system of fraud throughout the Bank which was wide enough to justify closure. I hope it does not shock you too much, it is only a matter of realism that we do have occasions of fraud in banks. . . if we close down a bank every time we find an individual act or two of fraud we would have rather fewer banks than we do at the moment.(69)

Moreover, according to the Governor of the Bank of England, the moment the decision was made by the Bank that it would try to keep BCCI open rather than close it, it became essential to do everything possible to avoid contributing to its demise:

It is impossible for us to give what one might call an advance warning or a health warning. A hint from the Bank of England that somebody on our list may not be quite pukka would be the kiss of death to the future of a bank. We are in the difficult position that our banks are either on the list or they are struck off. I am sorry to say we have to leave it people to make their best judgment as to whether any one of those institutions is or is not fit to be a depository for the purpose they want.(70)

In short, depositors in the United Kingdom should regard their choice of banking institutions, according to the Governor of the Bank of England, by the ancient Latin maxim, "caveat emptor," let the buyer beware, and should not rely on the regulators to provide them with the facts. BCCI had become a bank too big to fail. In the effort to avoid that failure, the Bank of England was in no position to tell anyone the truth about its difficulties until it was too late for them to protect themselves.

Thus, unfortunately, rather than permitting ordinary depositors to find out for themselves the true state of BCCI's finances, the Bank of England, Price Waterhouse, Abu Dhabi and BCCI found themselves in collusion to deprive the public of the information necessary for them to reach any reasonable judgment on the matter, because the alternative would have been an immediate collapse of the bank.

Section 41 Report and BCCI's Closure

Throughout the remainder of 1990, and the spring of 1991, BCCI, Abu Dhabi, and the Bank of England continued to work on a restructuring of BCCI as a means of saving the bank, with the intention of collapsing its dozens of entities into three banks, to be based in London, Abu Dhabi, and Hong Kong. At the same time, Price Waterhouse continued to provide each of them with the information that the fraud at BCCI was massive, and that the losses associated with the fraud were mounting into the billions. All the while, BCCI, Abu Dhabi, the Bank of England, and Price Waterhouse worked together to keep what they knew about BCCI secret. The secrecy had become critical now that they all knew about the ongoing criminal investigation into BCCI taking place in New York City by the District Attorney. Each made a strenuous effort to prevent the District Attorney from obtaining the Price Waterhouse audit reports which contained the information that if known would destroy BCCI. But by late 1990, the District Attorney, after months of effort, had obtained some of the audit reports, and appeared to be narrowing in on an indictment of BCCI. At the same time, the Bank of England was also finally having to deal with inquiries from the Federal Reserve, which had been fully alerted to the state of affairs at BCCI for the first time not by the Bank of England, but by the Manhattan District Attorney.

As news continued to filter into the Bank of England from Price Waterhouse and from former BCCI officials, such as Masihur Rahman, who were now working to expose what had happened at the bank, the Bank of England began to conclude that the restructuring proposal advocated by Abu Dhabi might not be possible after all. In March, the Bank of England commissioned it formally to investigate BCCI under Section 41 of the UK's Banking Act. Finally, on June 22, 1991, Price Waterhouse delivered a draft report to the Bank of England, known under British law as a Section 41 report, demonstrating that "fraud on a significant scale had been committed and that it had involved a significant number of people both inside and outside the bank."(71)

One week later, the Bank of England alerted the UK's Serious Fraud Office to begin an investigation of BCCI. Four days later, on July 5, 1991, BCCI was closed internationally in an action initiated by the Bank of England. Apart from the information contained in the Price Waterhouse report, the Bank of England would have had reason to act in any case. The Bank of England had reason to know that the New York District Attorney was only a few weeks away from indicting BCCI for massive fraud in an indictment that would outline in some detail most of the practices described privately to the Bank of England by Price Waterhouse. If the Bank of England had not finally acted, the indictments would have triggered a massive run on BCCI that would have resulted in the bank's immediate global closure in any case.

_______________

Notes:

1. S. Hrg. 102-379 pp. 99-100.

2. See S. Hrg. 102-350 Pt. 4 p. 80, on the popularity of the Cayman Islands for banks because of lax licensing requirements, absence of reserve requirements, income taxes, or lending limitations.

3. Heimann, id, pp. 73-74.

4. House of Commons Treasury and Civil Service Committee Fourth Report, Banking Supervision and BCCI: International and National Regulation, March 4, 1992, hereafter "House of Commons Report," p. xiii.

5. Memorandum, Office of the Comptroller of the Currency, January 4, 1978, Comptroller John Heimann.

6. Memorandum, OCC, to File from John G. Hensel, January 17, 1978.

7. Memorandum, OCC, Serino to Heimann, April 3, 1978, "Notes On Meeting with Pharaon."

8. Various documents, OCC files on NBG, March-July, 1978.

9. Office of Comptroller of the Currency Report of Joseph Vaez, February 15, 1978, memo to Robert R. Bench from J.E. Vaez, National Bank Examiner London regarding BCCI Holdings (Luxembourg).

10. Letter, Robert Altman to Mannion of Federal Reserve, May 9, 1978.

11. Id. p. 144.

12. Clifford, April 23, 1981 hearing, id.

13. Prepared testimony of Virgil Mattingly, S. Hrg. 102-379 p. 118.

14. Id.

15. Prepared testimony of Virgil Mattingly and William Taylor, S. Hrg. 102-350 Pt. 1 pp. 86-87.

16. Id at 87.

17. The details of these interactions between BCCI and First American are set forth in some detail in the chapter on BCCI's later activities in the United States and in the chapter concerning Clifford and Altman.

18. S. Hrg. 102-379 p. 138.

19. House Committee on Banking, Finance and Urban Affairs, September 11, 1991, Pt. 1, "Bank of Credit and Commerce International Investigation, Serial No. 102-69 p. 685.

20. S. Hrg. 102-379 p. 139.

21. Testimony of Virgil Mattingly, S. Hrg. 103-479 p. 139.

22. Chronology, Committee on Banking, Finance and Urban Affairs, House of Representatives, September 11, 1991, Bank of Credit and Commerce International, Pt 1, Serial No. 102-69 p. 686.

23. S. Hrg. 102-379 p. 118.

24. The details of this information, and of how and when it was communicated within the U.S. government, are set forth in the chapter concerning BCCI's relations with the CIA and foreign intelligence.

25. Chronology, House Committee on Banking, Finance, and Urban Affairs, BCCI Pt 1, September 11, 1991, Serial No, 102-89 p. 688.

26. S. Hrg. 102-379 p. 119.

27. Ryback of Federal Reserve to Robert Altman, Clifford & Warnke, S. Hrg. 102-350 Pt. 3 pp. 440-441.

28. Naqvi to Altman, January 31, 1990, S. Hrg. 102-350 Pt. 3 pp. 442-443.

29. Altman to Ryback, February 5, 1990, S. Hrg. 102-350 Pt. 3 pp. 444-445.

30. Chronology, House Banking Committee, BCCI Pt 1, id., p. 689.

31. Chronology, House Banking Committee, BCCI Pt. 1, id. pp. 689-690.

32. S. Hrg. 102-379 p. 119.

33. S. Hrg. 102-379 p. 120.

34. S. Hrg. 102-379 p. 120.

35. Id.

36. The Federal Reserve's findings on these issues are set forth in the Summary of Charges issued by the Board of Governors of the Federal Reserve, In the Matter of BCCI, issued July 29, 1991, and In the Matter of Clark Clifford, issued July 29, 1992. These findings are set forth in some detail in the chapters on BCCI in the United States and the chapter on Clifford and Altman.

37. An account of those enforcement actions as of May 18, 1992, provided by the Federal Reserve to the Subcommittee, is contained at S. Hrg. 102-350 Pt. 4 pp. 144-145.

38. Numerous Federal Reserve investigators and attorneys participated in the investigation and drafting of the summary of charges, including Richard Small, Thomas Baxter, and Kit Wheatley. While their personal roles, and the roles of their colleagues, in exposing the full extent of wrongdoing in connection with BCCI have remained necessarily behind the scenes, the value of their work has been incalculable, both to the Subcommittee specifically and to the public at large.

39. Prepared testimony of Virgil Mattingly, S. Hrg. 102-350 Pt. 4 pp. 147-148.

40. S. Hrg. 102-350 Pt. 5 p. 153.

41. S. Hrg. 102-350 Pt 5 p. 169.

42. S. Hrg. 102-350 p. 171.

43. Prepared testimony of John W. Stone, FDIC, S. Hrg. 102-350 Pt. 5 p. 163.

44. See testimony of John Stone, FDIC, S. Hrg. 102-350 Pt. 5 p. 160.

45. A detailed account of this transaction is set forth in the chapter on BCCI's later activities in the United States.

46. S. Hrg. 102-350 Pt. 5 p. 158.

47. A detailed account of what the CIA knew at the time, and what it told the Treasury and OCC is contained in the chapter concerning BCCI, the CIA and foreign intelligence.

48. S. Hrg. 102-350 Pt. 5 p. 158.

49. S. Hrg. 102-350 Pt 5 p. 159.

50. S. Hrg. 102-350 Pt. 5 pp. 156-157.

51. See section on Argentina in chapter on BCCI's activities in foreign countries.

52. S. Hrg. 102-350 Pt. 5 p. 162.

53. S. Hrg. 102-350 Pt. 5 p. 160.

54. The full hearing on this legislation is set forth in S. Hrg. 102-379, May 23, 1991, which includes its text at p. 9, and a Federal Reserve analysis at p. 122.

55. See Euromoney, S. Hrg. 1-2-350, Pt. 3 p. 308.

56. Euromoney, id., Financial Times, The Many Who Adds a Touch of Mysticism to Banking, May 17, 1978, S. Hrg. 102-350, Pt. 3 pp. 303-304.

57. Bank of England chronology, Annex, Fourth Report, House of Commons Treasury and Civil Service Committee, March 4, 1992, "Banking Supervision and BCCI" p xiii.

58. House of Commons report, id, p. xiii.

59. Id.

60. House of Commons Report, id p. xxxi.

61. House of Commons Report, id, p. 54.

62. Extract, Paragraph 144, Report, Inquiry into the Supervision of the Bank of Credit and Commerce International, The Right Honorable Lord Justice Bingham, July 27, 1992, hereafter, "Bingham Report."

63. House of Commons Report, id, Memorandum submitted by the Institut Monetaire Luxembourgeois (IML) p. 95.

64. See Price Waterhouse comment, reprinted in House of Commons report, id, p. ix.

65. Paragraph 268, Bingham Report, id.

66. Price Waterhouse Report BCCI Holdings to the Audit Committee, Unaudited Results to 30 September 1989 and Outlook for the Year; Subcommittee document.

67. Bingham Report, id, Paragraphs 3l3-320.

68. Memorandum submitted by Price Waterhouse in reply to Questions from the House of Commons Committee on Treasury and Civil Service, February 5, 1992.

69. Minutes of Evidence Taken Before The House of Commons Committee on Treasury and Civil Service, July 23, 1991, Fourth Report, Banking Supervision and BCCI, printed March 4, 1992, p. 104.

70. Id, p. 108.

71. Id. Price Waterhouse's findings of the Section 41 report are reviewed in some detail in the chapter concerning BCCI's criminality.

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