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Millions of dollars sent abroad from Kabul Bank

Millions of dollars sent abroad from Kabul Bank

Nov 28, 2012 - 09:12

KABULinfo-icon (PANinfo-icon): The Independent Joint Anti-Corruption Monitoring and Evaluation Committee on Wednesday said $5 billion, including $400 million the Kabul Bank’s shareholders, were illegally transferred abroad.

Kabul Bank, once the country’s largest private-sector lender, plunged into a deep financial crisis due to unauthorised loans and other anomalies. Reports put at $900 million the loans issued to a number of people, including stakeholders

Addressing a news conference, the committee chairman, Drago Kos, said money of clients and the central bank was stolen by Kabul Bank founders as result of widespread corruption and off-book loans.

He accused shareholders and managers of committing massive embezzlement through complicated lending practices and mismanagement.

Also on Wednesday, an independent review said the Kabul Bank top officials, their friends and relatives got rich off $861 million in fraudulent loans.

Funded by international donors, the report called the bank a sophisticated operation. Loans were rarely repaid, with borrowers getting more credit to return the old. The bank's credit department used over 100 stamps for fake companies to make documents appear authentic.

The money ended up in accounts in more than two dozen countries, according to the report, which alleged poor oversight by bank regulators and political interference in the criminal investigation.

Deliberate deception and systematic failure caused the embezzlement of more than $900m, benefitting a small group of influential Afghans. The allegations include fraudulent property deals, massive illegal loans to government officials and fake corporations.

The Independent Joint Anti-corruption Monitoring and Evaluation Committee said airline food trays were used as one means through which $861m was smuggled out of the country. The 87-page report said 10 pilots working for Pamir Airways were paid annual salaries of over $300,000.

"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," the report said. Prosecutors from the attorney general's office were called in to amend the indictment to conform to the decisions taken.

The bank's founder and chairman Sher Khan Farnoud and CEO Khalilullah Ferozi, who are accused of stealing hundreds of millions of dollars through off-book loans, are among the 22 suspects.

Drago Kos, the chief investigator, vowed to put the perpetrators behind bars. Without giving details, he said a dozen shareholders and seven private companies were involved in the scandal.

About 22 people were accused of embezzlement in the case, and their trial started on Wednesday. At three hearings, 18 people, including Sher Khan Farnood and Khalil Ferozi, appeared before the court to defend themselves.

But Kos said $935 million of the bank was transferred abroad through various systems. He added $825 million was needed to bail out the bank. The Afghan government will have to pay six percent of its GDP to save the bank, which would be a huge blow to the country's economy.  

He asked: "Why the central bank, detectives and law-enforcement organs delayed action to deal with the bank scandal; why the government did not take timely measures and AGO delayed investigation into cases."

The investigation showed in addition to issuing illegal loans and hiding assets, Kabul Bank management also transferred large sums of money overseas. 

Carried out by over 15 people, including national and international lawyers, economists, audit experts and law-enforcement authorities, the report said the scandal had resulted in a financial crisis in Afghanistaninfo-icon.

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