BCCI Impropriety Felt Worldwide from South America to Africa to Asia, Central Banks and Private Depositors Are Affected. INTERNATIONAL BANK SCANDAL

Article excerpt

IN Arab businessman recalls a typical set-up at one of the many overseas branches of Bank of Credit and Commerce International (BCCI): a wide open room, filled with desks in no particular order. Absent an identifiable hierarchy, he quips, it's difficult to pin down individual responsibility.

This scenario is an appropriate metaphor for the broadest-based banking scandal in history. BCCI's $20 billion operation, covering some 70 countries, is now under investigation and indictment for massive fraud.

Branches around the world have been shut down due to allegations ranging from laundering arms- and narcotics-sales profits to financing clandestine nuclear-weapons programs. Investigators are slowly uncovering the implicated governments, corporations, and individuals; their estimates put BCCI's criminal customer base at 3,000 worldwide.

Observers assert that the lax international financial system, with poor control over global banking transactions, provided a vacuum for illicit dealings.

"Things don't work when no one has a clear sense of responsibility," says Lawrence Summers, chief economist of the World Bank. "And when you're (based in London,) headquartered in Luxembourg, and you're operating all over the world, there's no one whose fault it clearly is, if things go wrong." Deposits and loans

Since its inception, allege international investigators, the bank doled out more money than it took on deposit and bankrolled commercially unviable and criminal enterprises.

BCCI branch managers often solicited deposits through bribery, and then used those funds to cover bad loans, skimming huge profits and falsifying records to show a positive balance sheet, investigators allege.

The worldwide impact of this recklessness looms large. Casualties may include central banks from Jamaica to Cameroon that put their nation's savings on deposit with BCCI. The nest eggs of tens of thousands of small, African, Asian, Middle Eastern, and Latin depositors are in jeopardy.

BCCI was ready with money for government leaders whose own economic policies rendered their countries unacceptable for certain International Monetary Fund (IMF) or World Bank assistance, says Jack Blum, a former US Senate investigator into BCCI.

The bank is the largest private bank in Nigeria. "BCCI lent the Nigerian government $1 billion to get around requirements put on it by the IMF."

The bank has served African governments, corporations, and small businesses from Egypt to Zimbabwe. The closure of many African BCCI branches has hit hard a large portion of African society dependent on BCCI financing.

In Latin America, according to Mr. Blum, BCCI encouraged capital flight by offering to do the illegal transport and conversion of the local currency, "destroying the opportunity of that country to develop ... and leaving the continent with the begging bowl and the World Bank and other public institutions which have to make up the difference."

In Southwest Asia, Blum says, BCCI may have helped transport the goods and finances of Afghan guerrillas involved in heroin trafficking. …