It also raised millions of revenue by accounting techniques to show false profits and hided their losses which occur in trading and bad debt. The biggest bank fraud in history According to Manhattan District Attorney Robert M. Morgenthau, the BCCI scandal that came to light in 1991 was ‘the largest bank fraud in world history. ‘ Perhaps no other criminal enterprise has involved or at least embarrassed so many prominent people, from billionaire Arab sheikhs to Third World dictators to present and former leading figures in the U. S. and British governments.
Certainly none could match the international web of financial chicanery, political intrigue, and unsavoury figures with which BCCI was said to be associated. (Source: Encyclopaedia Encarta 2007) BCCI was engaged in four major frauds. One was a cover-up of $633m of losses on treasury trading. The second was the illegal acquisition through nominees of several banks in the US, in which it spend $346m. The third was a complex manipulation of accounts to prop up its largest borrower, the gulf shipping group of Pakistan, to which it lent more than $725m, which was over the limit set by banking regulations.
The fourth was fundamental fraud by which BCCI allegedly acquire secret control of 56% of its own shares at a cost of over $500m. BCCI was a serpent eating its own tail. These sums add up to more than $2bn. But this is a minimum: it omits the enormous cost to BCCI of financing its secret losses. The manipulation to cover up the fraud involved another $2bn, bringing the grand total to well over $4bn. BCCI frauds were the main reasons for its corporate failure. The scale the fraud is breathtaking enough. But while most frauds involve the disappearance of real money, BCCI did the exact opposite.
The Dissertation on Letter Of Credit Fraud Seller Bank
1 Introduction - Letters of Credit in International Trade. In international trade, payment by means of a letter of credit has become so widely used that Justice Kerr of the English Court has called the instrument, "the life-blood of international commerce." [1] It is the most effective method to secure payment in an international trade transaction, in a way that takes care of the interests of both ...
It manufactured billions of dollars out of nothing to conceal gaping holes in its balance sheet, like a giant game of ‘Double Your Money’. This involved extraordinary financial gymnastics and illegal loans on a huge scale. When BCCI finally came crashing down, it was not with a thud, but in a shower of paper. (Behind Closed Door: FT Publication) BCCI initiated every single route to excel its growth. In a first place its corporate structure was so complicated which involved uses of shell corporations frequently termed as satellites, bank confidentiality and secrecy.
BCCI’s top management including nominees which also includes some famous personalities in politics were involved in corruption and made it a supreme atmosphere for crime. BCCI’s criminalities included, •Fraud by BCCI and BCCI customers involving billions of dollars; money laundering in Europe, Africa, Asia, and the Americas; •BCCI’s bribery of officials in most of those locations, •Support of terrorism, arms trafficking, and the sale of nuclear technologies; •Management of prostitution; •The commission and facilitation of income tax evasion, smuggling, and illegal immigration; •Illicit purchases of banks and real estate. Source: Walker, L. 2001) Abdul Basir, head of BCCI Pakistan operation, says: “We looked after clients in the most efficient, personalised manner. ” The diamond market which is home to Lahore’s famous dancing girls, Prostitutes, who for centuries have provided entertainment for emperors and their courtiers – and latterly for politicians, Arab Sheikhs and bankers. BCCI used these girls to treat Arabs rich businessmen and major shareholders. BCCI’s Zafar Iqbal, former chief executive, was in charge of managing prostitutes. Corporate Failure of BCCI
There were two main reasons of BCCI’s corporate failure apart from their criminal activities. These were high risk loans and trading. A bank’s treasury plays a key role in managing its financial affairs by trading large amounts of money and currencies. Some if this dealing is done on behalf of clients. But bank treasuries also speculate on whether currencies will rise or fall, using their own money. BCCI was no exception. According to Price Waterhouse, the bank combined these two activities by trading huge amounts of clients’ money – but in its own name, and without their knowledge.
The Essay on Banking System Bank Banks Money
: SYSTEM OF BANKING: . -31: -2004- PLAN: Introduction... 3 Banking service... 4 Establishing a bank account... 5 Cashier's check... 6 The banks of England... 7 The banking system in Russia... 9 The conclusion... 10 The literature... 11 The translation... 12 1. Introduction My scientific work devoted to the analyses a banking system. In my talk today I will be looking at banking services and the ...
