Treasury in the dock over BCCI

THE Treasury will face court action this week to force it to hand over sensitive documents connected with the collapse of fraud-riddled Bank of Credit & Commerce International in 1991.

Material relating to possible Government use of BCCI for spying and other covert activity is thought to be contained in a secret annex to the official inquiry into the affair.

The liquidator of BCCI, accountancy firm Deloitte & Touche, wants access to the annex to help its £1 billion lawsuit against the Bank of England, which it accuses of not properly regulating BCCI.

It thinks the documents will prove that the authorities turned a blind eye to fraud at BCCI for political and intelligence-gathering reasons.

There has long been speculation that British spymasters used BCCI to monitor Middle East terrorists and to support friendly governments in the Arab world.

But the Treasury, which commissioned the inquiry, refuses to hand over the material, saying it is not a party to the action and that the information is confidential.

BCCI operated in 69 countries from its hub in the City. As evidence mounted of fraud and money laundering, it was shut down, riddled with 'black holes' totalling £13 billion, by worldwide regulators.

The inquiry described the Bank of England's supervision of BCCI as 'a tragedy of errors, misunderstandings and failures of communication'.