Grand Cayman

Grand Cayman is an island of the Cayman Islands in the Caribbean. It was the chartered home of BCCI Overseas, one of the two banks under the holding company of the Bank of Credit and Commerce International (BCCI), and of the ICIC group, which BCCI used as its "bank within a bank."¹²

BCCI's Two Charters

Agha Hasan Abedi needed, according to the Kerry-Brown Senate report, "a bank secrecy and confidentiality haven," which he found first in Luxembourg and then in Grand Cayman. BCCI was at first incorporated only in Luxembourg. "Two years later, a holding company was created, BCCI Holdings, with the bank underneath it BCC S.A., split into two parts, BCCI S.A., with head offices in Luxembourg, and BCCI Overseas, with head offices in Grand Cayman. Luxembourg was used mostly for BCCI's European and Middle East locations, and the Grand Caymans mostly for Third World Countries." The structure was further complicated by "parallel banks," among them the Kuwait International Finance Company, the Banque de Commerce et de Placements in Geneva, the National Bank of Oman, and "the series of entities based in the Grand Caymans and collectively known as 'ICIC,' which became the principal 'bank within a bank' at BCCI."¹

The bank licensed in Florida, whose license the state comptroller Gerald Lewis was reviewing after BCCI's guilty plea in Tampa in 1990, was the Bank of Credit and Commerce International (Overseas) Limited.³

Audit and Regulation

Abedi divided BCCI's annual audits between Ernst & Whinney and Price Waterhouse, "with Ernst & Whinney taking responsibility over only the holding company and BCCI Luxembourg, and Price Waterhouse taking responsibility over only BCCI Overseas in the Grand Cayman," an arrangement that ended with Ernst & Whinney's withdrawal in 1986; Price Waterhouse took over the consolidated audit in 1987. Even then ICIC, KIFCO and BCP were excluded from its work, and "as late as 1990, key documents involving guarantees against loss by BCCI to principal shareholders, held in the Grand Caymans and in Abu Dhabi, do not appear to have been made available to auditors."¹

The Senate report stated: "BCCI's other home, the Grand Caymans, did not regulate any bank licensed there. The Caymans lack of regulation was precisely the inducement for banks to charter themselves there," citing hearing testimony on "the popularity of the Cayman Islands for banks because of lax licensing requirements, absence of reserve requirements, income taxes, or lending limitations." The Bank of England regarded BCCI as a foreign bank based in Luxembourg and the Grand Caymans and treated their authorities as its "lead regulators," although BCCI's real headquarters was in London. "This neat arrangement by BCCI, together with its division of its auditing functions between two auditors, one for 'Luxembourg' and the other for 'Grand Caymans,' ensured that BCCI's activities could not be adequately monitored by anyone."⁴

At the end of 1985 a Bank of England official wrote in an internal memorandum, after a week inside BCCI: "I am absolutely certain that the real head office is located on six floors of 100 Leadenhall Street. . . . It is clear that Luxembourg is an historic chapter in the BCCI story and that Grand Cayman is a tax haven used as a booking centre." Among its recommendations the Senate report noted that the new U.S. law on foreign bank supervision did not prohibit banks "regulated in bank regulatory havens, such as Grand Caymans, Luxembourg," from operating in the United States.⁴

ICIC

ICIC Holdings and ICIC (Overseas) Limited were both incorporated on April 6, 1976, the latter "as an offshore bank to facilitate the purchase and sale of BCCI shares and to provide private banking services for BCCI shareholders and customers"; ICIC Apex Holding Limited, incorporated on October 2, 1987, became the group's ultimate holding company, "equivalent to a charitable trust, with the beneficiaries designated as 'mankind at large.'" In April 1978 the Federal Reserve asked Clark Clifford and Robert Altman whether ICIC, "BCCI's Grand Caymans affiliate," was acting as a vehicle for the acquisition of Financial General Bankshares; Altman replied that BCCI had moved funds for the Middle Eastern investors into the United States but had not financed the purchases. First American, which BCCI secretly acquired, later placed deposits with ICIC.²⁴

Price Waterhouse reported in April 1986 that "in most instances none of the officers of the Grand Cayman office were able to correctly identify either the name of the borrower or the credit officer responsible for monitoring the account at other locations." When BCCI failed to improve its handling of these numbered accounts, the auditors took no further action beyond marking the note with an asterisk in later reports. In 1990 Price Waterhouse found no evidence that the BCCI front man Mohammed Hammoud owned any of the companies to which BCCI and "its Grand Caymans affiliate ICIC had lent some $110 million."²⁵

Liquidation

After BCCI was closed in 1991, liquidators from Deloitte Ross Tohmatsu reported to the court in Grand Cayman on August 30, 1991, on International Credit and Investment Company (Overseas) Ltd. According to the Senate report, the liquidators found that "ICIC was not really a bank at all, but a post-office box location to 'book' transactions that were initiated, organized, and approved in other parts of BCCI. In essence, ICIC was a 'conduit' or mechanism for BCCI's fraud." The report listed "the refusal of authorities in the United Kingdom and in the Grand Caymans to share information with Congress and other U.S. investigators as a consequence of their interpretation of local bank confidentiality and privacy laws" among the obstacles to its investigation.²

George Town Bank

Fernando Olivera, a member of the Peruvian House of Deputies who headed a commission investigating the placement of Peru's international reserves with BCCI, told the Senate subcommittee on August 2, 1991: "we have a document of the Swiss Bank Corp. in Panama providing that BCCI oversees George Town Bank Corp Grand Cayman. From there, transfers were made to the Security Bank to the Swiss Bank in New York and transferred from there to an account in Panama of the Swiss Bank. These were the bribes for these officers," naming Lionel Figueroa and Hector Neyra of the central bank of Peru.⁶