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BCCI and White Collar Crime - Essay Example

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Bank of Credit and Commerce International (BCCI) was considered to be the major industrial bank that was set up in Pakistan in the year 1972. Agha H. Abedi taking capital from Sheikh Zayed bin Sultan, emir of Abu Dhabi founded BCCI with a mission to have mystic banking facility…
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BCCI and White Collar Crime
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BCCI and White Collar Crime

But, success was not the only step for BCCI's fate. Price Waterhouse was asked to carry inquiry in March, 1991. It was 24th June, 1991 when they submitted the Sandstorm Report to Bank of England stating that BCCI had engaged in fraud case.
Main capital base to BCCI were virtual oil-rich Arab leaders who acted to be the investor but, in reality they were working as nominees. Bank since its beginning attracted people to deposit their funds by pretending that they have more capital which in reality was not true. It used to use the deposits in order to meet the expenses. Even it forced its own shareholders to participate in this drama. Major actions that resulted into frauds by BCCI were enlisted by New York District Attorney. According to them the important points are:
Middle East personalities included their names and funds to BCCI as an investor which in effect turned to be flaw because their funding was based on guaranteed no-risk return instead of actual sponsor at risk.
After getting the request from Bank of England, Price Waterhouse presented its report on BCCI known as Sandstorm Report. As per the report, BCCI committed several mistakes and did many unofficial activities that are out of one company's ethics. Price Waterhouse persons collected records from banks of various countries, reviewed them and interviewed in some cases, finally formed one draft keeping all key points there. During their scrutiny they found that BCCI did not record $600 million of BCCI's deposit. It first knocked the Price Waterhouse audit persons. Among the other types of frauds described by audit include: manipulation of their account at the time of non-performing loan, fabricated profit, hidden losses, setting up of untrue loans for repurchasing shares, cheating of deposits, unreal transactions and charges, showing nominees as capitalists, illegal repurchasing platform for shareholders, bad investment, missing of standardized procedure of records, artificial customer loans and most important fallacious audit confirmation (Price Waterhouse, 1987).
After losing money for the reason of poor lending operations, instead of accepting provisions for losses they just simply cheated them. Apart from that BCCI used to manipulate their accounts. Actual reason for this manipulation was make the bank appear to be a good profitable and reputed institution than it was which helped it to get security for its deposits.
With these approaches when condition of BCCI was worse, made it worst after the loss of $500 million in 1985. That loss was only due to commodity trading undertaken through Capcom.
Along with the numbered accounts in order to manipulate accounts through back-to-back transactions they used to use "managers ledgers." It was such a bad activity that the person keeping the records even forgets which person made which transaction. In most of the cases, none of the authority was able to identify either the name of borrower or credit officer responsible for controlling the accounts (Price Waterhouse report to BCCI, 1986).
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