Friday, October 31, 2014


Afghanistan

Report Claims Kabul Bank Fraud Sent Almost $900 Million Abroad

Kabul Bank failed in 2010.
Kabul Bank failed in 2010.
By RFE/RL
An independent report on the Kabul Bank scandal says that institution was involved in a fraud that sent nearly $900 million outside Afghanistan.

A forensic audit financed by international donors offers details about how the money from fraudulent loans ended up in accounts in more than two dozen countries for the benefit of Kabul Bank managers, their friends, and relatives.

The bank's failure in 2010 and subsequent bailout represented more than 5 percent of Afghanistan's gross domestic product.

Drago Kos, the chairman the committee behind the report, spoke about the need for improvements in Afghanistan's financial system.

"What we want to achieve is to make the financial and all other important systems in this country better," he told reporters on November 28. "And last but not least, we would like to do away with nepotism, impunity, and political interference, with a view to help [sic] ensure the future of Afghanistan as a functional, transparent, and accountable democracy."

Three Afghans and three foreigners sat on the Independent Joint Anticorruption Monitoring and Evaluation Committee, which conducted the investigation.

Its report says the vast majority of Kabul Bank’s loans were made to just 19 people and companies.

Those who are reported to have benefited from dealings with the bank include President Hamid Karzai's brother Mahmud, who denies any wrongdoing.

The scandal has also implicated a brother of Vice President Mohammad Qasim Fahim.

Neither of the two men, who were shareholders in the bank, is facing charges.

'High-Level Political Interference'

The report points out that Kabul Bank has "reportedly provided millions of dollars to the campaign of at least one presidential candidate" against the central bank's advice.

The investigation did not name President Karzai, but the bank was said to have been a donor to his 2009 reelection campaign.

Kos blamed part of the problem on inherent flaws in the Afghan banking system.

"Some of the reasons are specifically related to the financial sector of Afghanistan: the weak banking governance, the low capacity of the national bank of Afghanistan, and the lack of coordination among regulatory bodies and law-enforcement agencies," he said.

A trial of some 22 suspects is being handled by a special tribunal set up by President Karzai.

Defendants include Kabul Bank founder and Chairman Sher Khan Farnoud and CEO Khalilullah Ferozi.

But the report alleges that there was high-level political interference in the investigation into the scandal -- an allegation the Attorney-General's Office rejects.

The report says that "information received during the inquiry indicates that the final decision about who to indict was made at the political level in the spring of 2011 by a high-ranking committee."

It adds that “the indictment did not include officials from accounting firms that created false documents for Kabul Bank, airline employees that smuggled money out of Afghanistan, or shareholders who received funds from loans at zero interest, apparently without the intention of repayment."

Speaking to the Reuters news agency at his office in the basement of a fortified house in Kabul, the special tribunal's chief judge, Shamsul Rahman Shams, said, "We are flexing our muscles with the big guys who could easily get rid of us, but we are committed to solve this case."

He acknowledged the investigation was “a dangerous task” but added that “we’re not scared.”

The government's handling of the case is being watched closely by Western countries and international institutions that have pledged billions of dollars in aid to Afghanistan.

With reporting by RFE/RL's Radio Free Afghanistan, AP, AFP, and Reuters

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