SOUTH America appears to be just another fraying part of the world-wide tapestry of money laundering, arms smuggling, and fraud that investigators say was woven by Bank of Credit & Commerce International.Headquartered in London, BCCI's global reach for new deposits extended via branch offices to 70 countries, including Brazil, Argentina, and Colombia. The widening scandal is threatening politicians in these countries (as well as in Peru), with dangerous fallout since it erupted July 5. New details continue to emerge. Two former employees say BCCI's illicit ownership of three US banks was widely known by BCCI employees - and one of the employees says he and others who sold BCCI services told many in Brazil's banking and financial community of the US link. "Within [BCCI's Brazilian arm, Banco de Credito e Comercio de Investimento], it was a well-known fact that BCCI owned First American, Independence Bank, and the National Bank of Georgia," says an employee who worked there for nearly two years in the late 1980s. "It was not a secret." The employee says he and others told other Brazilian bankers and prospective clients of the US link in order to identify BCCI, market its services, and lend credibility to attract depositors. BCCI used its tie to First American and other US banks as a marketing tool for several years prior to 1988, sources say. US regulators and authorities until recently have said they were unaware in this period of BCCI's illicit ownership of US banks. On July 31, however, the US Central Intelligence Agency revealed a 1986 report it sent to the US Federal Reserve. Prior to that, US authorities said their first knowledge of the BCCI-First American link resulted from a Customs Service probe in September 1988. A congressional investigation into when US regulators knew about BCCI's US operations - and why they did not act sooner - is proceeding.
Missing the link to US US authorities, in particular the Drug Enforcement Administration, were believed at the time to be trying to monitor the flow of drug money in Brazil. But officials at the US Embassy in Brasilia had no comment on whether US agents might have been aware of the US-BCCI connection. DEA officials in Washington declined comment, deferring a response to the Justice Department. "I think the assertions are interesting, but useless from a law enforcement perspective," says Doug Tillett, a Justice Department spokesman. "It's unreasonable to expect the Justice department or its agents to be the world's ombudsman." BCCI Brazil, one-third owned by London-based BCCI Holdings, is not one of the bank's larger branches. The employee who says many in Brazil's banking community knew of the US connection says he saw no documentary evidence of the link to First American, but says then-branch-president Ashley Jenner told him about it. Mr. Jenner, who now works out of BCCI's Paris office, denies this. "I learned about this [in the last two to three months] from the [newspapers] and also, within the bank, there was a general circular which stated that there should be no dealings between any of the branches and [First American]," he said in a recent interview by phone. The former BCCI Brazil employee says he cannot recall specific individuals to whom he spoke about the link to US banks. Finance executives, foreign exchange operators, and bankers interviewed in Brazil turned up no recollection of the connection. But a second banker, who also worked at BCCI in 1988, says the connection between BCCI and First American was "transparent to the general banking community for a long time." This BCCI banker, who requested anonymity, says: "I never knew exactly what the relationship was, but I knew they had the same shareholders, and everybody else at BCCI knew, too." In April 1988, the second BCCI banker says his boss even recommended he visit First American's offices, near BCCI's in New York. He recalls that he went with the mission of assisting "in formulating a business plan for [BCCI's] sister company." Thomas Hancock, president of BCCI in Brazil, which is still open and doing business in Sao Paulo, disputes the recollections of former employees. "I haven't seen anything to say BCCI owns shares in First American, or any other financial institution in the US," he says. m still not convinced."
Rich, famous own shares Because of BCCI's complex and secretive ownership of its many units, investigators have had trouble determining who owns what. Brazil's BCCI branch, with only 37 employees and $27 million in assets, has been for sale for months with no takers. The bank says it will change its name. Thus far the bank has been forthcoming about the identities of Brazilian shareholders of the local branch, some of them well-connected public figures. In addition to BCCI's one-third ownership of its Brazilian branch, a local trading company, IAT, owns another third. Sergo Correa da Costa, a former ambassador to the US, and Rio de Janeiro lawyer Carlos Leone Figueira, share the remaining third. Ernane Galveas, a former finance minister sits on the bank's four-man board. The bank gained unwanted notoriety in Brazil in April 1989, when police stopped two employees at the Sao Paulo airport with $150,000 in travelers' checks in their luggage, on their way to Paraguay. A judge dropped charges against the bank. Still, the local daily newspaper, Jornal do Brasil, described the bank as "a known specialist in actively participating in foreign exchange remittances" during a period in which Brazil was restricting money sent abroad. "Those of us who had worked at traditional banks were amazed to see how openly they did capital-flight operations in the bank," says the former BCCI Brazil employee. "They even telephoned the black-market dollar dealer if the client needed to buy the dollars to be sent abroad." Many local bankers say BCCI's alleged capital flight dealings would not have been that unusual given Brazil's unstable economy.