Financial Transparency Coalition

Congratulations to Professor Prem Sikka, a senior adviser to the Tax Justice Network, for his extraordinary success on the case of Bank of Credit and Commerce International (BCCI). Information on the investigation into BCCI, that was previously withheld from the public by the UK government, has now been released. Prem has fought a legal battle for five years so that missing information in the “Sandstorm Report” could be made publicly available.

The case of BCCI, (referred to by many as “Bank of Crooks and Commerce International”), is possibly the biggest banking fraud in history. BCCI is a story of massive-scale money laundering, bribery, blackmail, and organised crime, operating through a secrecy network involving deceit, fraud, and the brokering of power and influence around the world.

We blogged an update recently, and you can see a report on the breaking open of the Sandstorm Report on the website of the Association for Accountancy and Business Affairs (AABA).

After a five-year legal battle the UK government has finally released most of the Sandstorm Report on 7 September 2011. The report was prepared by Price Waterhouse (BCCI auditors) for the Bank of England though it was never finalized. BCCI was the biggest banking fraud of the twentieth century. Some 1.4 million depositors lost $11bn. Unlike many other large corporate frauds and banking scandals the UK government did not appoint inspectors to prepare a report. No parliamentary committee has ever been given sight of the Sandstorm Report. UK legislators pass laws without knowledge of the facts or opportunity to interrogate wrongdoers.

Prem Sikka had first requested the information in March 2006 and after refusal by the UK Treasury and the Information Commissioner he pursued the matter through the courts. Throughout the case, he represented himself, incurred his own costs and did not have the benefit of any legal advisers. The government used taxpayers’ resources in a futile attempt to conceal identity of many people, including convicted criminals.

Ever since 1991, most of the Sandstorm Report has been publicly available in the US though it has been considered to be a state secret in the UK. This censored version was obtained by AABA and made publicly available in UK in 1999. However, critical information on names of wrongdoers and those implicated in the scandal was withheld, blanked out. The UK government “erected a wall of secrecy around the BCCI frauds.”

Prem Sikka has analysed and compared the previous censored version with the newly released information. On the AABA site you can access this in detail.

The use of offshore, secrecy jurisdictions, played a large part in the BCCI story. Elements of these connections were withheld. For instance, “The words ‘Grand Cayman’ were purged throughout the document”. Also, the name of a Turks and Caicos company was blanked out, as were certain connections in Bahrain.

Included in the concealed information were names of people with global political and business influence, and a number of financial and governmental institutions such as the Abu Dhabi Investment Authority, Bear Steans, Dubai Islamic Bank, ATB (a UK bank), Credit Suisse, Habib Bank, Government of Cameroon, National Bank of Georgia, National Commercial Bank of Saudi Arabia, Qatar Islamic Bank, Royal Bank of Scotland, Saudi Cairo Bank, Saudi National Commercial Bank (SNCB), Security Pacific and State Bank of India.

The BCCI case, and the massive cover up by the UK government and cronies, raises some issues of vital concern:

• The UK government did not withdraw ambassadors. The UK government did not seek extradition of the culprits, shut down foreign embassies, demand trade sanctions or regime change. It just covered up the names of wrongdoers and kept parliament and the people in the dark. How can anyone trust the Bank of England or the Treasury to tell the truth about the current banking crash?
• The release of the information has considerable relevance to the current banking crisis. The UK government can now be forced to publish reports. They can be forced to publish the names of the wrongdoers.
• The UK government secrecy meant that many financial institutions were unable to make appropriate assessments of risk. Under the UK (and many other countries) law, financial institutions are required to apply the “Know Your Customer” (or KYC) tests. Since the UK government shielded the names of many wrongdoers it did not enable the institutions to assess the risks. It would be recalled that BCCI indulged in money laundering. Many of the parties associated with are still active in the business world today.
• The Sandstorm Report prepared by BCCI auditors Price Waterhouse documents a catalogue of fraud which had been taking place over a long period of time. Yet auditors continued to give a clean bill of health to BCCI. All audit reports were unqualified.
• BCCI had all the paraphernalia associated with contemporary corporate governance: audit committees, non-executive directors, mission statements, internal auditors, external auditors, vision statements and corporate social responsibility statements. Yet no one spoke up. There was no independent investigation into the governance of BCCI. The investigation and lessons may have generated a debate about better banking regulation and governance, but that was not to be. We only speculate on how the current banking crisis might have been checked if the UK government was not so keen on cover-up.

As we also mentioned previously, for a description of the offshore nature of BCCI, see Treasure Islands, as well as various books included Peter Truell and Larry Gurwin’s book False Profits. A TJN senior adviser, Jack Blum, was a central player in breaking this case open in the first place.

Cross-posted with permission from the TJN Blog…