After five-year legal battle, truth about BCCI collapse may finally be revealed

Written By: Prem Sikka
Published: July 31, 2011 Last modified: July 31, 2011

The decision is particularly pertinent given criticism from many quarters that the banking crash of 2007-08 has not been examined by a proper public inquiry into the legal and political system that allowed the bankers to run amok with our money.

The closure in July 1991 of BCCI was the biggest banking fraud of the 20th century – and resulted in billions of pounds in losses to 1.4 million depositors, many of them from poor and developing countries. Successive governments have concealed crucial documents which would shed light on what really went on. I have fought a five-year legal battle to bring these papers into the public domain.

Unlike the secondary banking crash of the mid-1970s, the BCCI closure was not followed by the appointment of Department of Trade and Industry inspectors to collect the facts. In 1992, the Government published a report by Lord Justice Bingham on the role the Bank of England played in the scandal, but large parts of his report were suppressed. A crucial document relating to the closure was the Sandstorm Report – commissioned by the Bank of England and containing details of frauds and the names of some of the wrongdoers. The report was a state secret even though most of it was available in the US Library of Congress.

In March 2006, through a Freedom of Information request, I asked the Treasury to provide the missing information. Instead of taking the statutory 20 days, it took two years and refused to publish the information. I filed a complaint with the Information Commissioner, who took another two years to support the Treasury’s position. After further legal battles, and without the aid of lawyers, I finally secured a court judgment on July 11. It orders the Government to publish most of the missing information within 35 days.

The court order provides some clues as to what the Treasury has been concealing. These include the names of one or more heads of state, their advisors, international trading concerns and several international banks – senior employees who exercised ultimate control over the whole of BCCI’s operations and were the architects of a group-wide programme of fraud and concealment, and the vast amounts involved. The three judges expressed surprise at the way the Treasury sought to conceal this information.

The Bank of England was a key architect of the BCCI cover up. It is now a regulator of the banks but critics say there is little evidence to show it can be trusted to come clean to the public or parliamentary committees.

About Prem Sikka

Prem Sikka is professor of accounting at Essex University

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