Kabul Bank Fraud Buttressed by Weak Governance: MEC

News - Afghanistan


The massive fraud that led to Kabul Bank's collapse was underpinned by weak governance in key oversight agencies as well as law enforcement structures, according to a public enquiry into the debacle.

The independent committee appointed to investigate the extent of the Kabul Bank crisis said that as much as $5 billion was transferred out of Afghanistan over a four-year period and urged the government to act on having the assets frozen.

The Independent Joint Anti-Corruption Monitoring And Evaluation Committee (MEC) presented an 87-page report on Wednesday which details the direct involvement of the bank's executives and shareholders in transferring $900 million overseas and the fallout of the "one of the largest banking failures in the world".

"Some of the reasons are specifically related to the financial sector of Afghanistan. This is the big banking governance, the low capacity and lack of coordination among regulatory bodies and the law enforcement agencies," MEC member Drago Kos said at the press briefing in Kabul on the reasons such massive fraud was able to happen.

The report said that $861 million, or 92 percent of Kabul Bank's loan book, went to 12 individuals and 7 companies linked to these individuals in at least nine countries.

"We have the list of countries where the money went: China, Turkmenistan, United Kingdom, Kazakhstan, Korea, Turkey, Russian Federation, United States and to Switzerland. This means that it is possible for the attorney general and for the courts to write requests for mutual legal assistance to have the money frozen and confiscated at the end," MEC member Eva Joly said.

The report further names at total of 28 countries where the money ended up.

The report also names those directly including key shareholders Sherkhan Farnood, the former bank chairman, the former chief executive officer Khalilullah Ferozi, and the brothers of President Hamid Karzai and first Vice President Mohammad Qasim Fahim.

The MEC was made up of six people: three Afghans professionals and three international corruption experts. The five-month public enquiry was funded by Britain's Department of International Development and the Danish International Development Agency after the International Monetary Fund called for a thorough investigation.

As at October 31, the former Kabul Bank receivers had recovered US$135.3 million in cash and US$181 in assets, the report said.

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