A little before dawn on January 27, 1980, a wealthy Australian lawyer named Frank Nugan was found dead in his silver Mercedes-Benz on a quiet road outside Lithgow, in the Blue Mountains west of Sydney. A rifle lay across his body; the verdict was suicide. In the car was a Bible, and tucked inside it, according to the investigators who catalogued the scene, was a slip of paper bearing two names. One was a United States congressman. The other was William Colby — the former Director of Central Intelligence, the man who had run the CIA's phoenix-program|Phoenix Program in Vietnam and, more recently, served as legal counsel to the bank Frank Nugan had built. Within weeks the bank, Nugan Hand, had collapsed in a fog of shredded records, missing millions, and impossible questions. Nugan's partner, an American Green Beret turned CIA contractor named Michael Jon Hand, shaved his beard, obtained false identity documents with the help of a former CIA operative, and vanished from Australia entirely. He would not be located for thirty-five years.
Nugan Hand was the first time the public got a clear look at a particular kind of institution — a bank that was also a covert-operations utility, staffed at the top with retired spies and admirals, moving drug money and weapons money and intelligence money through the same accounts as its legitimate deposits, and protected, while it was useful, by the agencies it served. It was not the last. A decade later a far larger institution would collapse in a far larger scandal, and the same outline would be visible underneath: the Bank of Credit and Commerce International. Together, Nugan Hand and BCCI define the genre of the intelligence bank, and the genre is the point — not any single transaction, but the recurring discovery that the formal financial system contains, from time to time, institutions whose real business is the invisible movement of state power's money.
Nugan Hand was founded in Sydney in 1973 by Frank Nugan and Michael Hand. Hand had served with the Green Berets in Laos, where he worked alongside the CIA's secret army during the war the cia-drugs|Agency was running through the Golden Triangle, and he carried those connections into the bank. The roster he and Nugan assembled was extraordinary for a mid-sized merchant bank on the other side of the world from Washington: Colby as counsel; retired Rear Admiral Earl "Buddy" Yates as president; retired Air Force General Edwin Black running the Hawaii branch; General Erle Cocke Jr. in the Washington office; Walter McDonald, a former CIA deputy director, as a consultant. The bank opened branches in precisely the places a legitimate Australian merchant bank had no obvious reason to be: Chiang Mai, at the heart of the Golden Triangle opium trade; Hong Kong; Saudi Arabia; a string of tax havens.
The Stewart Royal Commission, which the Australian government convened to investigate the wreckage and which reported in 1985, found evidence that the bank had laundered drug money and moved funds for covert purposes, but its reach stopped at the water's edge: it could not compel cooperation from American intelligence agencies, and the American connections it could see most clearly were the ones it was least able to pursue. The journalist Jonathan Kwitny, in The Crimes of Patriots (1987), assembled the fullest account and reached the conclusion the Commission could only gesture at — that Nugan Hand had functioned as an instrument of American covert finance in the Asia-Pacific, and that its collapse had been less an accident than a controlled demolition, with the records destroyed and the one partner who might have explained everything spirited out of the country. Michael Hand was finally located in 2015 by the Australian researcher Peter Butt, living quietly in Idaho under an assumed name. He has never answered for the bank.
If Nugan Hand was the prototype, the Bank of Credit and Commerce International was the genre perfected and scaled to the size of the world. BCCI was founded in 1972 by a charismatic Pakistani financier named Agha Hasan Abedi, who conceived of it as something new: a great bank of the Third World, owned by Gulf oil money, run by South Asian talent, answerable to no single nation's regulators. By 1991 it operated four hundred branches in seventy-eight countries and claimed more than $20 billion in assets. Its structure was its genius and its crime: incorporated in Luxembourg, operating from London and Karachi, audited in pieces by different firms in different jurisdictions, it was deliberately built so that no single regulator could ever see the whole. Its client list was a roll call of the era's outlaws and operators — Manuel Noriega, Saddam Hussein, the Medellín cartel, the Abu Nidal Organization, the heroin warlord Khun Sa, the financiers of the Pakistani nuclear program, and the intelligence services of half a dozen countries, the CIA among them.
The full anatomy of BCCI's role bankrolling the Afghan war — the conduit to the ISI, the laundering of Hekmatyar's heroin proceeds back into weapons procurement — belongs to the Operation Cyclone story, where the bank financed the largest covert operation in CIA history. What matters to the genre is the shape of the relationship. BCCI was not a bank that the CIA happened to use; it was a bank whose criminality and whose usefulness were the same property. Senator John Kerry's subcommittee, which produced the most thorough public investigation, called it in its December 1992 report "a financial supermarket for criminals and intelligence services worldwide." The two functions were inseparable. A bank willing to move the cartel's money was, for exactly that reason, a bank able to move the Agency's.
In July 1991, as the bank was being seized, Time magazine published a cover investigation by Jonathan Beaty and S. C. Gwynne reporting that BCCI maintained an in-house enforcement and intelligence arm — a unit of perhaps 1,500 men, drawn from Pakistani intelligence and elsewhere, that the reporters called the "black network." Its alleged functions ran from intimidation and surveillance to arms trafficking and the procurement of whatever a powerful client required. The claim has always been contested in its particulars, and skeptics note that Time's sources were thin and its scope likely inflated. But the underlying point survived the doubts: BCCI did not merely launder money for spies. It behaved, in its own right, like a private intelligence service with a balance sheet — which is the logical endpoint of the intelligence bank, the moment the instrument acquires its own operational capability.
The detail that most clearly distinguishes BCCI from an ordinary criminal bank is what it did inside the United States. By American law BCCI could not own a U.S. bank outright. So it bought one in secret. Through a group of front men — among them Kamal Adham, the former head of Saudi intelligence — BCCI acquired control of First American Bankshares, the largest bank holding company in Washington, D.C., while swearing to the Federal Reserve that the Arab investors were independent principals and BCCI was merely their advisor. To run First American as its respectable public face, the arrangement installed one of the most trusted men in the capital: Clark Clifford, adviser to four Democratic presidents, former Secretary of Defense, the very embodiment of the Washington wise man, together with his law partner and protégé Robert Altman.
When the truth emerged — that the bank at the center of the American establishment had been secretly owned all along by the most criminal financial institution on earth — Clifford and Altman were indicted in 1992. Clifford, in his eighties and gravely ill, never stood trial; Altman was acquitted in 1993. Whether the two men were knowing instruments or elaborately deceived dupes was never resolved in court. But the episode is the shadow-elite|shadow elite's banking utility rendered literal: a foreign criminal-intelligence bank reaching into the capital of the United States and renting, as its mask, the single most reputable figure in American public life.
BCCI was not brought down by the agencies it served. It was brought down, in the first instance, by a Customs agent. Robert Mazur spent years undercover as a money launderer named Bob Musella, working a sting designated Operation C-Chase out of Tampa, until in October 1988 the operation produced indictments of the bank and its officers for laundering Medellín cartel cocaine money. And then something revealing happened: very little. BCCI was allowed to plead guilty in 1990 to a narrow set of charges and pay a modest forfeiture, and the matter might have ended there. The federal apparatus that should have pursued the largest banking fraud in history moved with a slowness that critics found difficult to explain by incompetence alone.
What forced the reckoning was a local prosecutor. Robert Morgenthau, the District Attorney of Manhattan, pursued BCCI with a tenacity the Justice Department did not, and in July 1991 his office indicted the bank even as federal authorities and the Bank of England were finally moving to seize it. The Kerry report would later document that the Justice Department and the CIA had both possessed information about BCCI's criminality for years without acting on it. To the bank's defenders in the skeptical camp, this was bureaucratic cowardice and jurisdictional chaos — no single regulator owned the problem, and the Bank of England was timid. To everyone who reads the The Deep State pattern in it, the foot-dragging was the protection thesis in action: the bank was useful to too many powerful institutions to be killed while it was still serving them, and it was finally allowed to die only when the Cold War had ended and the operations it banked were winding down. The bank that had been too useful to close became, at last, useless enough to seize.
When the Price Waterhouse audit commissioned by the Bank of England — the document known as the Sandstorm report — finally laid the fraud bare, regulators in seven countries seized BCCI's operations on July 5, 1991. More than a million depositors, many of them ordinary savers in the developing world, lost their money. Abedi, by then incapacitated by a stroke, was indicted but died in Pakistan in 1995 without ever facing an American or British court; Pakistan refused to extradite him. As with Nugan Hand, the central figure was beyond reach, the records were a labyrinth, and the full accounting was never delivered.
The honest reading holds two things at once. The skeptical case is strong: BCCI was, before anything else, a colossal Ponzi-like fraud built by Abedi for enrichment and the vanity of a Third World banking empire, and the intelligence services were opportunistic customers exploiting a useful crook, not puppeteers running the operation. The Kerry report itself, for all that it documented, stopped short of concluding that the CIA controlled the bank. Much of the "protection" is adequately explained by the genuine regulatory black hole BCCI engineered for itself — no consolidated supervisor anywhere on earth. And the parade of retired spies on Nugan Hand's letterhead may have been prestige window-dressing as much as operational command.
And yet the pattern resists being explained entirely away. Twice, a generation apart, an institution appeared that fused a real bank with a covert-operations utility; both were stocked with intelligence alumni; both moved drug money and covert money through the same pipes; both enjoyed years of immunity from regulators who knew; and both ended with a dead or vanished principal, a bonfire of records, and an investigation that could see the iran-contra|off-books money but never quite reach the men who moved it. Whether the intelligence bank is a deliberate institutional form or merely what happens when a sufficiently criminal bank and a sufficiently lawless intelligence culture discover how useful they are to each other, the result is the same: a financial system that contains, structurally, the means by which state power can spend money that no legislature ever approved and no auditor will ever find. BCCI and Nugan Hand are not the exception that proves the system is clean. They are the two times the genre was caught.