The Abu Dhabi-based Bank of Credit and Commerce International (BCCI) was involved in drug trafficking and money-laundering, and had illegally acquired Washington's biggest bank, the First American Bank, as a front. The BCCI used a four phase to disguise its massive treasury losses: funds were stolen from client accounts, notably in Caymans and London; the money was transferred to third party banks; those banks deposited the funds in BCCI without indicating their origin; such funds were then recorded as fresh deposits. Other techniques included booking fictitious loans to clients and using the cash itself; accepting deposits from customers without recording it in the accounts. The amount involved exceeded US$1,318 million. BCCI operated in 69 countries with its operations centering on London. These involved undocumented transfers totalling US$10 billion. Following investigation in the UK, only 3 people had been arrested by 1993, although the BCCI's London chief presided over misuse of funds totalling £1.2 billion. The CIA had known BCCI was a criminal enterprise since at least 1986, but did not advise the National Security Council or the Federal Reserve. At the time the CIA was using BCCI to transfer funds for covert operations in support of Afghan and Nicaraguan rebels. It was also used by the USA to raise loans for support of Iraq's Saddam Hussein on the back of USA credits. In 1992 the Bank of England (despite questions about conflict of interest) probed allegations that some of its officials had received bribes in connection with the BCCI scandal and examined some 130 of possible banking criminality following the BCCI scandal. The bank had been accused of laxity in supervising BCCI operation in the UK.
The carelessness of banking practices, particularly million dollar failed loans, inflicts pain on bank customers whose pockets are being drained by high service fees designed to keep the banks solvent; on the taxpayers who are funding the tax-deductible loan losses; on the thousands of rank-and-file bank employees whose jobs are being sacrificed on the altar of cost-efficiency; and on the credit-starved small-business sector (which in Canada managed to create 352,000 jobs in the first three-quarters of 1992 versus 97,000 lost jobs in the corporate sector), but is bearing the brunt of bankers' new wariness in supplying start-up and expansion capital.
In 1993 the Bank of England asserted, following an investigation in the wake of the BCCI scandal, that bank fraud was still predominantly "through and on banks" rather than by banks themselves.