• Home
• Video
• Books by Ikram Sehgal
• About

The BCCI Saga ABEDI – Past, Present and Future

Enshrined in any democracy is an individual’s “God Given” right to personal privacy. A natural corollary of this is the discretion exercised by financial institutions, the fundamental premise of the management of funds for any entity, personal and/or corporate individual and/or collective. To that end, banking is necessarily a secretive discipline, bankers may be taciturn by force of circumstances, reserve becomes their first nature. Switzerland, Luxembourg, Cayman Islands, Jersey Islands, etc are famous havens for the depositing of excess funds, most of them can be said to be of illegal status, case in point the frustrating search for the Marcos billions. Secrecy in banking remains the greatest attribute for success, far from being any disqualification. Till the middle of this century, “private banking” was almost the sole domain of the Swiss. Even now the Nazi millions are hoarded away in safe Swiss custody, in many of the cases the owners have ceased to exist. On the other hand flamboyance is often considered an anathema by the conservative world of bankers and is treated with ambivalence bordering on apprehension. If you should add blatant aggressiveness to this you will have a volatile mix which is not conducive to the palate of the world of international banking, no matter that they themselves operate just as brashly, but from (and in) the shadows. To that end, Agha Hassan Abedi represented an anachronism, a banker in the traditional mould who kept the financial dealings of his clients confidential but who maintained an extremely high profile by moving comfortably among Kings, Presidents, Sheikhs, Princes, Senior Government functionaries, etc. While he confined himself to the oil-rich Kingdoms and States as well as the impoverished centres of the Third World he was tolerated, his move into the bastions of the developed world led to his ultimate undoing. However, one must caution here against any orchestrated litanies against the so-called Jewish lobby. Living in a world of conspiracies we have begun to believe that every action not to our liking is a conspiracy. One must indulge in self-criticism about one’s shortcomings before passing on the buck to all and sundry.

There is no society on this earth which can be considered more equal than that of the United States of America, the fundamental essence of that equality is a dedicated national penchant to be fair to all its citizens. While there may be aberrations galore, born out of ignorance and die-hard parochialism that recognizes no logic, the fundamental premise of the State is to provide for all its residents, citizen and non-citizen, equal opportunity and equal justice, inequities and discrimination fighting a losing battle against the interpretation of the laws of the land in a generally fair and diligent manner, devoted to the good of society as a whole rather than the vested interest of an individual and/or a group. This propensity for fair play is an endearing American quality and is the magnet that attracts all races and religions to its shores. The USA is a great melting pot, in the world today it has the least discrimination on a pro-rata average.

TIME and NEWSWEEK recently carried damaging articles about BCCI and its founder, Agha Hassan Abedi, these were identical enough for us to conclude that they emanated from the same source, were so one-sided and tainted by obvious vested interest that they lacked the normal objectivity of these two very fine weekly international publications. No incident concerning either BCCI or Abedi being newsworthy in the weeks immediately preceding, this coincidence of sudden motivation to besmirch the reputation of a semi-invalid and his banking creation needs some attention.

Agha Hassan Abedi founded United Bank Limited (UBL) in 1959 at the instance of the Saigols, one of the 21 major business families then running Pakistan’s industry and commerce, who were peeved at being discriminated against in respect of credit by Habib Bank Limited (HBL) and Muslim Commercial Bank Limited (MCB), owned respectively by rival business groups, the Habibs and the Adamjees. Abedi had joined Habib Bank 12 years earlier as a Senior Selective Service Officer. As UBL’s first GM and its Director at the age of 37, Abedi soon became its President and later its Chairman concurrently. Unwittingly the Saigols provided the first chink in the armour of the elite club of the predator business families (who brooked no trespassing into their economic preserve by anyone) by inducting professional senior management for UBL. Fortunately for Pakistan’s economy, UBL became the rallying point for mass business discontent against the avarice and greed of a handful of the really rich. Professional management, rather than family scions, dictated banking policy and ran the bank on a day to day basis. Blessed with a magnetic business acumen that revolutionized the concept of credit approval and disbursement thereof, Abedi made UBL into a giant rivalling HBL. By 1971 UBL had 912 domestic and 24 international branches, with assets exceeding US$ 1 billion.

By 1970, four years after leaving the Ayub regime, which he served in various ministerial capacities for a period of eight years since 1958, Zulfikar Ali Bhutto had politically harnessed the public resentment against robber barons and translated the aspirations of the masses for “Roti, Kapra Aur Makan” into a brilliant electoral victory for his PPP in then West Pakistan. With East Pakistan becoming Bangladesh, Bhutto became President of Pakistan. Seeking to curb the powers of the rich-elite in future electoral manipulation, he launched an economically disastrous nationalisation campaign, capped by the takeover of banks and other financial institutions, playing momentarily to the gallery of domestic mass approval. Inadvertently he undercut the natural process of upheaval against inequity and discrimination which had been gaining momentum. Whatever may be the shortcomings of nationalisation, the saving grace was the opening of bank branches for socio-economic (in addition to that of commercial) reasons for the benefit of the masses. General banking service to the customer, which was steadily improving because of competition among the various banks whether it comprised financial offerings or common courtesy, took a nose-dive. On the average, the common man came out better, at least he got a banking service, if all banks come into the private sector he is not likely to be accepted as a bank customer but as the equivalent of something that the cat brought in through the door.

Retiring prematurely at 49, cast adrift because of nationalisation, Abedi worked his credibility in banking and financial circles to create the Bank of Credit and Commerce International (BCCI). Supported by a clutch of Saudi and Emirates Princes and businessmen, the shareholders included the Bank of America NT and SA, (which came aboard mainly to penetrate the Middle East market). Shaikh Zayed Bin Nahyan, the Ruler of Abu Dhabi, besides participating as a major shareholder, deposited huge personal and State Funds (Abu Dhabi Investment Company — ADIC) as a token of his support. BCCI was probably the first bank to grow without the shadow of one single Central Bank or with the support of any one nation as a home base, having no parallel in modern banking history. The very fact of its being Stateless laid the foundations of its future global corporation status. Genius and timing then combined with Providence, nothing could have been more crucial than the oil crisis of 1973, the new bank rose on the crest of the wave of oil money. Combining Western concepts of business with the oriental penchant for loyalty and inter-relationship, BCCI was rapidly transformed into a global colossus.

Inspiring individual leadership backed up by the strong fabric of a loyal management team at various levels made employees look at the vision envisaged and believe that fulfillment of their individual destinies was synonymous with BCCI (and Agha Hassan Abedi). To grow into a world-wide financial institution of 11,000 employees with over US$ 16 billion in assets spread over 70 countries in 18 years from a minuscule and meagre amount of US$ 2.5 million takes some doing — and some leader. To decry men of vision their earned glory in the sun is a universal pastime, one must look closely at all their achievements before defaming them.

Pakistanis are intermittently world champions in hockey, in squash Jahangir and Jansher rule supreme. Our pilots (PAF and PIA) are second to none but the discipline in which we really excel is in banking. BCCI may have been a Stateless bank, the state of the art “personalised services” in modern banking has been initiated by BCCI. Pakistan’s professional expertise in international banking is greatly respected, case in point the number of senior Pakistani executives in international finance institutions including the brilliant No.2 in the World Bank, Moeen Qureshi. He didn’t rise to that post because of his blue eyes. The world of international commercial banking has changed with the advent of electronics, coupled with the expansion of operations in the Third World, the established international commercial financial institutions had to draw on executive manpower from the targeted regions itself, the personnel drawn from Asia stood head and shoulders above the rest in certain banking disciplines. Unfortunately in BCCI (as well as those individuals selected by branches of western banks in-country) they did not always have the technical skills that comes from experience in modern banking since a fair number of them were brought in for influence-peddling rather than for any great expertise in professional matters. While matters regarding influence were sorted out satisfactorily, as time went on these personnel (with honourable exceptions) rose to higher positions and rose to responsibility without the ability required for these posts, becoming deadwood that could not easily be cast away. The corporate entities of the western world rarely inculcate individual loyalties which are considered part of the corporate scenery in Asia, however they have a sophisticated name for the influence peddlers, they are called “lobbyists”. Agha Hassan Abedi was the banking equivalent of the purported “Islamic” nuclear bomb in international banking, a closed club that suffers outsiders badly, innovations to change in its prevailing practices even worse.

Third World leaders became Abedi’s friends for a variety of mutually beneficial reasons. Operating on a global scale, BCCI got an edge when dealing with governments, helping many of the nationalised corporations beat temporary credit crunches, in return BCCI got a major piece of the financial transaction and also hoarded their illegal “take”. BCCI did use big names to further their business whenever it suited their interest and/or was profitable to their business partners. Unfortunately, BCCI could not remain discreet by following this business strategy and had to maintain a very high in-country and international profile. In each country, the pattern was to employ respected elder statesmen, former senior government officials and/or their children to open political and bureaucratic doors. Clifford and Altman billed both BCCI and First American US$ 1 million for their services as Attorneys from 1978 to 1990, their present submission that they were ignorant of the BCCI-First American connection would be testing credibility a bit too far. For a young upwardly mobile banker like Awan it did no harm to be associated with such an absolute leader like Noriega, how many times have Bank Presidents and Chairmen of US and other Multi-national banks met with Heads of State and of Government in the Third World? BCCI’s Corporate philosophy in promoting special personalised services for national leaders cannot pass the test of moral uprightness, in the case of Noriega it ranked of bad judgement bordering on indiscretion. No one can countenance accepting deposits of drug-tainted money, to provide a banking service to such persons is abhorrent, to say the least. On the other hand the finance world is extremely competitive and all major banks are into the same action. One may well ask, are there really Marcos millions and if they do exist, are we going to take a media go at Switzerland, Luxembourg, Jersey Islands, Cayman Islands, etc whose bankers have successfully avoided their uncovering, knowing that money to be siphoned off from government funds are, therefore, illegal? Indeed why do places like Switzerland, Luxembourg, the Jersey Islands or Cayman Islands etc exist, if not for Offshore funds. And what are Offshore funds? More often than not they are crime-tainted or is hoarded to avoid taxes and are used as staging points for money-laundering, in all cases they are illegal. There can be no defence for money laundering, but how many of the branches of US banks in this country offer “personalised services” to the drug mafia or those who are clearly associated with it?

When Abedi was building his financial empire by providing a “family package” of “personalised services” to his rich Middle East clients, the larger financial institutions of the world scoffed at the idea, today it has become a part and parcel of “private banking” offered by every large bank all over the world. In order to understand BCCI and how it has grown from virtually nothing to 11000 people spread over seventy countries in a mere 18 years, one has to refer to an original Abedi statement, quote “All creeds, all nationalities, all people are governed by the law of nature. Nature transcends ethnic differences and national boundaries. The laws of nature are universal — they are a part of the vast unconscious world which governs the more limited conscious world of our perception and reason”, unquote. There is a conflict of principles here, the written word differs from the ways of pursuing bank profit.

Very rarely in banking history has an institution without any nationality developed and obtained success as BCCI has done, attaining rapidly a stage of development which made it a truly global corporation in a few short years. There has been an attempt in BCCI to accommodate the spirit of different nations and to transform them into one giant melting pot. This attempt was made through a process of business and cultural transformation spearheaded by a shared vision, some of purpose and a clear perception. BCCI, like other multi-nationals, tried to change the very nature of business through the real management concept, principles of management were formed on the laws of nature and on a combination of western business concept of free enterprise and the eastern concept of being closer to nature and to the origins of things. After nationalisation in Pakistan, Abedi knew he could not depend upon national restraints based on the whims of an elite minority of the educated, he would have to develop a bank that would be free to pursue its own destiny. The Middle Eastern relationships were used and developed, he visualised that Middle East was going to change. Then came the big rise in oil prices, the focus of the world of finance changed overnight and Abedi’s star was ascendant in global prominence.

Since BCCI started with US$ 2.5 million capital base from Abu Dhabi, a lot of people could not comprehend the ambitions of the Bank at that time and this seriously underestimated the potential of the exercise. Most thought that Abedi’s new experiment would fail, but a number of his rich friends and loyal colleagues persisted with their faith in him. With the rise in oil prices BCCI found itself in a tremendous advantage as major part of the petrodollars flowed in the banking system, BCCI was set to grow and expand. They opened branches in UK, Europe, Middle East and Africa and very soon they were handling investments in local estate, stocks, bonds, etc, speaking the people’s language, giving clients personalised service and helping them in their trade and commerce. The bank took advantage of the developing countries need to assert their independence from their former colonial masters. In Africa BCCI became partners with the locals of each country. They formed long-term relationships with long-term commitments. BCCI was immersed in very rapid changing circumstances and it responded to the change, simultaneously and continuously. By 1986 the bank’s assets had grown over US$ 17 billion with a Capital base of over US$ 1 billion from the minuscule US$ 2.5 million Capital base in 1974.

As the bank grew materially, Abedi tried to instill a moral aspect as a priority. The Agenda of the Geneva Conference of senior BCCI executives in 1982 outlined the major objectives of BCCI to be, viz (1) Submission to God (2) Service to Humanity and (3) Giving. A charitable organisation, Global 2000, was established, which attracted ex-President of USA Jimmy Carter as a Sponsor. Thousands of needy persons throughout the underdeveloped world were assisted. Hospitals were established, free education and free medical were provided to the needy. Thousands of needy patients were sent abroad from Pakistan, India and Bangladesh for treatment under the charity programme. In 1983 BCCI decided to give 3.5% of gross salary to all the members of the staff every year to give to the needy. The idea was to enable the employees to participate at source in the joys of sharing.

Somewhere along the line, Agha Hassan Abedi decided that the Bank must have a home, that it could not remain Stateless. He saw the same opportunities in the USA that millions have seen in the many decades and centuries preceding him, a land of freedom and of hope, a land without the restraints of prejudice. USA is a land of endless economic opportunities, supported by dynamic banking practices that gives tremendous financial support to ideas and does not discriminate (as a State policy) because of race, religion, etc. The BCCI thus became an aspirant Corporate immigrant, for economic and psychological reasons. The First American Bank, with branches in Washington DC, Virginia, Maryland, etc presented a niche of available opportunity, the same investors who controlled BCCI bought out the First American Bank and immediately ran afoul of the system. In the USA, this constitutes a misdemeanour. Corporate moves in the States cannot (and should not) be made without an Attorney and an Accountant, in this case Clark Clifford and Robert Altman, respected law partners, provided that legal cover. It was their duty to point that out potential legal problems to (1) the shareholders and (2) US authorities. Using of “front men” is not a crime by itself, but suggesting that people of the calibre of Clifford and Altman were dupes is ludicrous to say the least. Abedi is accused of being an ingenuous person, businessmen are supposed to be, does that make them criminals? Avoiding the payment of taxes through the use of legal loopholes and Offshore tax havens is endemic in the western world, in the US it has become a national pastime, are we to label all such citizens crooked? However, there is definite evidence to suggest that drug-money laundering did take place, based on which Awan, Bilgrami and Associates were convicted and on which count BCCI has been fined in the US, after accepting its guilt. No one can countenance this aspect morally. When any organisation expands at pell-mell speed, the Chief Executive is pulled in opposite directions, the need to maintain momentum conflicts with the ability of management capacity to keep up. For an organisation relying heavily on integral loyalty among its employees, the induction of Western concept of “hire and fire” acts as a centrifugal force, but one which is necessary to efficiently remove unwanted personnel. The temptation to expand often dwarfs the need to consolidate, with usually tragic consequences. Agha Sahib had packed the upper echelons of BCCI with known senior managers from the South Asian sub-continent with uneven ability in the international financial arena and the result was marked intermittent performances. The independence given to subordinates was misused either for personal gain or even as a childish display of power. Many BCCI senior executives and middle level management made millions for themselves or lost millions on the bank’s account. Agha Hassan Abedi’s visionary concept of linkage between moral and material floundered at the altar of individual personal greed and/or incompetence. To put it bluntly, Agha Sahib trusted blindly, some of his employees looted the till blindly. His management team was not strong enough to function profitably, in his absence they simply fell apart. While Agha Sahib was busy in his charitable forays which became increasingly frequent, his senior managers took commercial decisions that lacked profitability. Another problem arose because very young executives found themselves moving around in the company of national leaders in the fulfilment of their role as bankers to nationalised corporations, as private bankers to unscrupulous and corrupt leaders, they also became their personal cronies, thus guilty by association with malfeasance. Access to power always has a heady effect, inexperience acts as an aphrodisiac. Morality was lost on the way, in every case the money involved kickbacks, that is plainly illegal, one cannot accept or harbour stolen property in any country of the world. The responsibility of maintaining sanity at higher levels revolves upon the leader of an institution. While Agha Hassan Abedi cannot ever be thought of as corrupt, there is doubt that some of his minions did willingly and knowingly indulge in corrupt practices without the discretion required in a banking environment. It is hardly fair to blame the excesses of individuals on him but the incessant demands of performance within the BCCI community resulted in such aberrations, in corporate entities this is not uncommon. The selection of young men because of their father’s position in the Pakistani bureaucracy went sour as they had to perforce rise to higher positions as time passed. Some of them were truly competent, in spite of their influence-peddling values they became assets to the bank. However, a lot of them remained PR men at best, lacking the technical skills necessary in the world of international banking. How many people can you use for “personalised services”, particularly when the phrase is rapidly assuming an ill-reputation. Abedi was not alone in this blatant use of influence peddling, most branches of US banks hired scions of Federal Secretaries on their payroll as bank officers, a lot of bureaucratic red tape was cut for the Banks and its Clients on the strength of a telephone call from “Papa”. One young man used to tool around Rawalpindi in a Lancia Sports Car in 1960 when the Federal Government had temporarily shifted there on its way to Islamabad. Given the fact that at that time many senior bureaucrats or senior army officers did not own cars, a schoolboy driving a sports car was not only an odd sight but should have been an embarrassment to his bureaucratic father but this was the order of the day for most of the scions at that time. Twenty five years later if this young man had graduated to the company of Latin America/Caribbean leaders, cavorting with them and their mistresses on their luxury yachts, it was simply a natural progression. These characters rose on the shoulders of the very strong Client-Patron relationship fostered in the Third World by the developed world, albeit in a sophisticated manner. Maybe someday someone will come across and do some revealing statistics on the “The Sons who have also Risen”.

While US must be concerned about the type of “private banking” coming into existence in Pakistan (some of it certainly going to act as a conduit for money laundering given that the same checks and balances do not exist in the Pakistan banking system as in the US), yet what about the money being laundered in 40 US banks as ascertained by the US Drug Enforcement Agency (DEA)? Or back again in Pakistan, what about the “Private Banking” offered to selected and key Pakistani citizens by US and other Western banks in Pakistan for at least a decade now? It is easy in Pakistan to get auditors and inspectors to look the other way, why not invite US inspectors and auditors to carry out a detailed check over the last decade of the banks of US origin in this country? Not many people of this country have liquid assets of encashable securities in any large quantity, at most they may have a couple of millions. Since US banks in Pakistan hardly accept real estate as security, insisting on encashable securities, their large advances to those other than multi-national corporations should be subject to scrutiny. It should be interesting to note who owns these encashable securities and from where they got the money in the first place? Or is the money advanced by the banks secured by collateral in foreign exchange deposits held outside the country?

The question revolves around whether it was BCCI Corporate philosophy to indulge knowingly in corrupt practices or was it individual initiative to enlarge profit base to show greater performance in a competitive corporate entity? If it was BCCI Corporate philosophy then not only Agha Hassan Abedi but his senior management team was involved, why is the whole senior management team still intact after Abedi’s retirement? Why do not the members of BCCI’s senior management team confirm whether Agha Hassan Abedi was really guilty of deliberate malfeasance? Isn’t it strange that none of them have spoken one word against their former mentor as regards any illegality? Agha Hassan Abedi may be physically semi-invalid, he remains mentally alert, this attack may have been made to pre-empt him from any future banking plans. John Kenneth Galbraith has said that “Banking may well be a career from which no man really recovers!” Abedi must thus be defended, in the absence of concrete substantiated evidence, against the vendetta to besmirch his good name. It is unthinkable that a man given to so much charity and good causes should have his reputation laid so low by fine publications like TIME and NEWSWEEK. In defence of TIME and NEWSWEEK it must be said that those involved in the investigative reporting must have been convincing enough for the editors to agree to their twisted slant.

For Pakistanis Agha Hassan Abedi is an icon of sorts, a visionary who made good his mission in life till physical ailment laid him low at a particularly crucial time for his banking empire. The resilience of BCCI in shrugging off their present problems has been remarkable, the staff have responded admirably (despite their inherent handicaps) to the crisis and that by itself is an ode to him. Abedi may have made Corporate mistakes but BCCI’s troubles began after his affliction. The massive infusion of funds that led to the change in the Bank’s control could have been avoided if he had been physically able to react during that crucial period to the financial crunch.

Given the present US mood, Pakistan should decidedly be circumspect about the supposed “Islamic Bomb” but Agha Hassan Abedi is a Pakistani Cause worth standing up for, at least to ensure fair play. In the meantime, Abedi is fighting back in the only way he knows how, by creating another bank.

Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.