Jul 21 2011

BCCI case close to breaking open

Posted by: Nick Shaxson in: Thoughts

I wrote in some detail in Treasure Islands about the super-hyper-ultra-corrupt Bank of Credit and Commerce International (BCCI,) which provided a shocking case study into the underbelly of global offshore finance. As a story, the BCCI case has everything: drugs, terrorism, sex, nuclear weapons, corruption, tax havens, secrecy – you name the vice, and it was probably an integral part of BCCI’s business model.

I noted how offshore was the core mechanism that BCCI used to escape regulation and to create deniability, and also that Britain, which (along with the secrecy jurisdictions of Cayman and Luxembourg) hosted one of BCCI’s central nodes, deliberately covered up a huge amount of information, so the public could not know who was involved in the murk.

Well, things may be about to change.

Yesterday Prem Sikka, Professor of Accounting at the University of Essex, won a remarkable court victory in the BCCI case, which opens the road to us finding out more about the financial institutions that were most implicated in the matter. I provided a witness statement in support of his case, citing Treasure Islands and the importance of understanding BCCI as a case study in understanding tax havens. Yesterday Sikka sent around the following email:

Dear All,

I am writing to thank you all for your help in my five year legal battle to secure some information about the Closure of  the Bank of Credit and Commerce International (BCCI) in 1991. It was the biggest banking fraud of all times, but the UK government protected wrongdoers through secrecy. I have now had a degree of success.  The court judgement can be seen here.

Last week three judges unanimously ordered the UK government to publish most of the missing information. The government can comply with this order or appeal to a higher court within 35 days. The case also establishes a new legal precedent in the UK and the government cannot easily hide behind the Data Protection laws to protect wrongdoers.

The judges said that the missing information “does contribute a very relevant element to the story as a whole”. The judges added that “we were not convinced that the public interest in maintaining the exemption [secrecy] outweighed the public interest in disclosure”.

What does the missing information show? I have not seen it as yet but the judgment provides some clues.

“The Sandstorm Report referred to the involvement of brokers who may have facilitated the manipulation of BCCI’s profits”.

“We found to our surprise that a number of companies and organisations were marked in this way, including international trading concerns and several international banks”.

“the mention of the initials of a particular nation’s investment vehicle … the head of the nation in question, an individual who had been involved in the organisation’s business and a second individual (identified at item 51 in Confidential Schedule 2) who had taken a loan from the organisation to enable him to buy back BCCI shares”

“A detailed review of the Sandstorm Report makes it clear that, in nearly every case, the employee named held a senior position and had been identified because he or she had been involved in unlawful transactions or attempts to conceal the financial consequences of those transactions and/or serious mismanagement”.

“We were surprised to see that the Treasury sought to extend the protection of the data protection principles to information about some individuals who exercised ultimate control over the whole of BCCI’s operations and were the architects of a group-wide programme of fraud and concealment, not to mention the creation of a culture that led others with positions of responsibility within the bank to follow their lead”

The episode raises serious questions about the UK government which values secrecy to protect wrongdoers more than informing the public. It also raises serious questions about the regulatory role of the Bank of England (BoE), which authorised the cover-up. The Bank has now returned as regulator of the UK financial institutions. Can it really be trusted to come clean to parliament or the public?

Thank you all for your help without which this battle would not have been possible.

In my own modest way I’d helped Sikka, by sending my own witness statement in support of his case.

Well done him.

2 comments so far

Links, 7/21 | emptywheel 7st July, 2011 9.37 pm

[…] Shaxson reports that a researcher has won an appeal to get key parts–names of key people, companies, and one […]

Demon 7th July, 2011 2.07 pm

Excellent news! Who’s next?

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