Subsequent investigations revealed that it was involved in massive money laundering and other financial crimes, and illegally gained the controlling interest in a major American bank. Investigators in the United States and the UK revealed that BCCI had been “set up deliberately to avoid centralized regulatory review, and operated extensively in bank secrecy jurisdictions. BCCI’s founder, Agha Hasan Abedi, started the bank in 1972. Abedi, a prolific banker, had previously set up the United Bank of Pakistan in 1959. BCCI expanded rapidly in the 1970s, pursuing long-term asset growth over profits, seeking high-net-worth individuals and regular large deposits.
BCCI entered the African markets in 1979, and Asia in the early 1980s. 248 managers and general managers reported directly to Abedi and the CEO Swaleh Naqvi. It was structured in such a way that no single country had overall regulatory supervision over it so as not to hinder potential growth and expansion opportunities. 4 billion with over 150 branches in 46 countries. In 1982, 15 Middle Eastern investors bought Financial General Bankshares, a large bank holding company headquartered in Washington, D.
All the investors were BCCI clients, but the Fed received assurances that BCCI would be in no way involved in the management of the company, which was renamed First American Bankshares. Other companies such as KIFCO and ICIC were audited by neither. In 1990, a Price Waterhouse audit of BCCI revealed an unaccountable loss of hundreds of millions of dollars. Much of BCCI’s documentation was also then transferred to Abu Dhabi. The audit also revealed numerous irregularities. When the Fed cleared the group of Arab investors to buy First American, it did so on condition that they supplement their personal funds with money borrowed from banks with no connection to BCCI. Contrary to that agreement, several stockholders had borrowed heavily from BCCI.
Even more seriously, they pledged their First American stock as collateral. Despite these problems, Price Waterhouse signed BCCI’s 1989 annual report, largely due to Zayed’s firm commitment to propping up the bank. Abedi was succeeded by Swaleh Naqvi as the bank’s chief, who, in the aftermath following controversy over BCCI, was replaced by Zafar Iqbal Chaudhry in the late 1990s. BCCI contended that its growth was fueled by the increasingly large number of deposits by oil-rich states who owned stock in the bank as well as by sovereign developing nations. However, this claim failed to mollify the regulators.