Unethical banking practices

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.

[Japan]

In 1991 major banks were obliged to apologize for their role in contributing to the so-called "bubble economy". Using stocks and land as collateral, they had allowed many companies to borrow funds in order to invest in more stocks and more land resulting in spiraling prices referred to by the central bank as assert inflation. Profligate lending by banks had also led to a series of loan scandals.

[Italy]

In 1994 the president of the Banco Nazionale de Lavoro, owned by the Treasury, suspended himself as investigations were launched by the Bank of Italy into a number of suspicious loans and property deals. The BNL has been linked to a number of scandals since 1981 when it was discovered that it had been infiltrated by the P2 Masonic Lodge, including an arms-to-Iraq scandal in which BNL sent some US$3 billion to Iraq. The president of Cariplo, one of Europe's largest savings banks was arrested for corruption at the same time. Both had senior positions in the Italian bankers association, a number of whose members, including presidents of the largest banks, were under investigation for offences ranging from abetting bankruptcy to presenting false accounts; all had tight links to the now-discredited political parties to which many of them owed their appointments. Many of the banks were alleged to be in collusion with the political system; in 1994 a former prime minister and justice minister were indicted for their involvement in the fraudulent bankruptcy of the Banco Ambrosiano, which handled Vatican finances and was linked to the P2 Masonic Lodge. Politicized banks, many owned by local authorities who enjoyed enormous powers of patronage through their ability to appoint managers, encouraged the fragmentation of the banking system and inhibited its privatization.

[Vatican]

In 1993 prosecutors investigating political bribery in Italy suspected the Institute for Public Works (the Vatican bank) had been used to launder millions of dollars paid illegally by corrupt businessmen to political parties. Specifically cited was a transaction of US$45 million in Italian treasury bonds. There was also question of its possible involvement in recycling part of the US$100 million paid in bribes by the Montedison group in 1989. The bank first came under judicial investigation 10 years previously for its role in the fraudulent bankruptcy of the Banco Ambrosiano in which it was a shareholder.