Bank Failure Robs Needy Children
Shutdown of international institution will close lifeline to Sabah and other relief agencies
LIKE many other small African relief organizations, the Sabah Project in Khartoum has been stretched to the limit keeping up with needs of a relentless stream of children displaced by hunger and war.For the past six years, its staff of 40 has helped keep street children alive, providing meals, foster care, vocational training, and medical services. Sabah's financial lifeline to international donors was the Bank of Credit and Commerce International (BCCI); funds were deposited in its account in the London branch and transferred as needed to the Khartoum branch. But two weeks ago Sabah's lifeline was cut when the BCCI was closed down by banking regulators. All of Sabah's money in both branches - about $250,000 - was frozen, and perhaps lost.Skip to next paragraph
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Massive fraud The collapse of BCCI's worldwide operations, the result of massive fraud, has thrown the spotlight on the sheikhs and captains of industry who will have to swallow most of an estimated $5 billion to $15 billion in losses. But if less noticed by the media, the effects of the biggest bank scandal in history are even more poignant in nations like Sudan, where sums as small as $250,000 can have a dramatic impact. Determined to keep the Sabah Project alive, staff members have turned to friends, relatives, and overseas charities to raise the money to carry on another day. But with the London bank's liquidation now imminent, prospects appear bleak. "It's difficult even to think of; it means Sabah will have to close," says Munir Ahmed Safieldin, the founder and director of Sabah, which means "morning" or "new beginning" in Arabic. "This is the present and future of homeless children in Sudan. Hundreds of kids who were served by Sabah will now have to go back [to the streets]. You cannot stand seeing all of your children dying in front of you." The Sabah Project is one of dozens of relief and development groups that relied on BCCI as an efficient and reliable conduit for transferring funds to third-world nations. "In Sudan we didn't have a lot of choice in efficient banks," says Mr. Safieldin. BCCI "understood the nature of our organization, and when we needed an urgent transaction, they did it. They covered our checks when we were short. It was a matter of good help." Few large international relief agencies have been seriously hurt by the BCCI scandal, since their assets are scattered widely in banks around the world. Oxfam, for example, may be able to transfer funds from other regions to save dozens of small agricultural projects effected when the BCCI closure wiped out a third of its annual budget for Senegal. But for many smaller groups, like the London-based Action on Disability and Development (ADD), the effects of the bank scandal could be devastating. "An agency of our size doesn't know. We had no idea whatever that this was a bank that was under a cloud," says Christopher Underhill, the director of ADD, which operates programs in Sudan to help disabled people set up small businesses. "Our only consideration was getting money to Sudan." "If the BCCI stays closed and if the Bank of Sudan can't intervene and save the funds, we will have to face up to the reality that our work in Sudan will be finished," says Mr. Underhill. One organization was more fortunate. Just last month, Band Aid, the British group that sponsored rock concerts in the mid-1980s to raise money to combat African famine, withdrew the last of millions of dollars invested in BCCI's Khartoum branch as part of a planned phase-out. BCCI was seized on July 5 by bank regulators in six countries, including the United States, after an audit disclosed that the bank was covering up huge losses and was on the verge of collapse. Dozens of indictments are expected to be handed down once auditors have had a chance to comb the books. Investigators will also be taking testimony from former employees, including several already convicted of using the bank to launder drug money in Florida. The bank had $20 billion in assets in 350 branches located in 70 countries. It is controlled by the ruling family of Abu Dhabi, the largest of the United Arab Emirates. In addition to institutional depositors like Sabah, victims of the collapse could include the central banks of several third-world nations, including Nigeria and Peru. The main victims of the bank scandal will be the thousands of individual depositors who now stand to lose their savings if BCCI's worldwide branches are liquidated.