TNAG-2245-FCO40-3228-Bank-of-Credit-and-Commerce-Hong-Kong-Limited-(BCCHK)-1991 — Page 252

UNCLASSIFIED

074031 MDHOAN 7196

SHEET OF THE GROUP IS OF THE ORDER OF US DOLLARS 20 (TWENTY) BILLION, OF WHICH BCCI SA ACCOUNTS FOR US DOLLARS 7.4 (SEVEN POINT FOUR) BILLION AND THE UK ALONE (WITH 25 BRANCHES AUTHORISED UNDER THE BANKING ACT) FOR US DOLLARS 3.2 (THREE POINT 2) BILLION. IN 1990, THE ABU DHABI RULING FAMILY AND GOVERNMENT BODIES INCREASED THEIR SHAREHOLDING IN BCCI TO ITS PRESENT LEVEL, IN THE WAKE OF SUBSTANTIAL LOSSES REFLECTED IN THE END-1989 ACCOUNTS. THE BULK OF THE MANAGEMENT OF THE BANK REMAINED PAKISTANI. THERE HAS BEEN A HIGH DEGREE OF PUBLIC INTEREST IN THIS INSTITUTION IN RECENT MONTHS, PARTICULARLY ARISING FROM ALLEGATIONS ABOUT ITS ACTIVITIES IN THE US, AND OF SPECULATION REGARDING FURTHER FINANCIAL PROBLEMS. HAVING INJECTED SUBSTANTIAL ADDITIONAL RESOURCES IN 1990, THE ABU DHABI GROUP OF SHAREHOLDERS WAS PLANNING A RESTRUCTURING OF THE BCC GROUP INTO THREE SEPARATE BANKS INCORPORATED IN LONDON, HONG KONG AND ABU DHABI, IN CONSULTATION WITH THE PRINCIPAL SUPERVISORS FROM WHOM NEW AUTHORISATIONS WERE REQUIRED. HOWEVER IN THE LIGHT INTER ALIA OF A REPORT COMMISSIONED BY THE BANK OF ENGLAND UNDER THE 1987 BANKING ACT, WHICH INCLUDES PRIMA FACIE EVIDENCE OF WIDESPREAD FRAUD, IT WAS CLEAR TO THE SUPERVISORY AUTHORITIES CONCERNED THAT THE PROPOSED RESTRUCTURING COULD NOT PROCEED AND THE ONLY POSSIBLE COURSE OF ACTION WAS FOR THE PRINCIPAL BANKS IN THE GROUP TO BE PUT INTO EFFECTIVE LIQUIDATION. THE BANK OF ENGLAND ACTED AS SOON AS IT HAD SUFFICIENT EVIDENCE ON WHICH TO DO SO.

10. THE EVIDENCE OF THIS REPORT INDICATES THAT THE FRAUD WAS ON A SUBSTANTIAL SCALE, PERVASIVE, AND HAD BEEN GOING ON FOR A CONSIDERABLE PERIOD OF TIME. THE FINANCIAL CONDITION OF THE BANK HAD BEEN POOR FOR SOME TIME, WHICH MAY HAVE LED TO MISTAKES AND ATTEMPTS TO COVER UP MISTAKES: THE TEMPTATION TO COVER UP MAY WELL HAVE LED IN TURN TO FRAUD. GIVEN THE POSSIBILITY OF LEGAL AND/OR CRIMINAL PROCEEDINGS IT WOULD NOT BE PROPER TO COMMENT ON THESE MATTERS IN FURTHER DETAIL. THE IMPLICATIONS OF THE FRAUD, HOWEVER, ARE SUCH THAT A FINANCIAL RESCUE WAS NOT A VIABLE OPTION.

HURD

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