THE serpentine coiling of the Bank of Credit & Commerce International's fraudulent worldwide operations has come as a shock to many in the United States. BCCI has caught in its sinister embrace such luminaries as Jimmy Carter and Clark Clifford, such pillars of the US banking system as First American Bankshares and National Bank of Georgia, and the Central Intelligence Agency.
Yet BCCI is only the latest in a string of financial scandals. BCCI, the S&Ls, Banca Nazionale del Lavoro (BNL) - each unfolding scandal was met by calls for stricter banking legislation. But choking banks with red tape won't protect depositors. We need no more laws; rather, we need better enforcement of those already on the books.
In August 1990, for example, Florida state regulators indicted BCCI and eight of its officers on charges of money laundering after a four-year investigation. Nonetheless, despite that investigation, BCCI was able to use Clifford and other front-men to illegally purchase three leading US banks in other states. It took another year, and the swindling of some $30 million more from US depositors, before the Federal Reserve Board and the Manhattan district attorney pressed charges against BCCI.
The Federal Reserve should have discovered earlier just who was backing Clifford and friends. Had it enforced the existing US laws, BCCI could not have seized control of the banks in Washington, D.C., California, and Georgia. It was the overseers' failure to act, not the failure of the legislation itself, that let BCCI defraud depositors.
In another case involving the BNL in Atlanta, proper enforcement of existing legis- lation could have avoided the loss of $1.9 billion to the US government. Between 1986 and 1990, BNL loaned some $4 billion to Iraq. Although channeled through a US Department of Agriculture export program run by the Commodity Credit Corporation (CCC), most of the transfer was fraudulent. BNL declared only a tiny fraction to the regulatory authorities, borrowed secretly on the international markets to raise the cash, and concealed transaction records on hidden computer disks. Iraq funneled much of the money into the Ministry of Industry and Military Production in Baghdad, which funded Saddam Hussein's chemical, nuclear, and ballistic weapon research. …