Millions of dollars spirited out of Afghanistan by Kabul Bank
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Hundreds of millions of dollars from Kabul Bank were spirited out of Afghanistan, some smuggled in airline food trays, to bank accounts in more than two dozen countries, according to an independent review released on Wednesday about massive fraud that led to the collapse of the nation's largest financial institution.
The report, which was financed by international donors, offers new details about how the men at Kabul Bank and their friends and relatives got rich by USD 861 million in fraudulent loans in what the International Monetary Fund has called a Ponzi scheme that used customer deposits and operated under nascent banking oversight in the war-torn country.
The report describes Kabul Bank as a sophisticated operation with one set of books for the eyes of regulators and another in the back room that logged how those running the bank and others were fattening their wallets.
Loans were made, but rarely repaid. Borrowers took out loans to pay back loans. Company documents and financial statements were fabricated. The bank's credit department used more than 100 corporate stamps for fake companies to make documents look authentic. The bank operated some of its more than 100 branches without a permit from the government.
The 87-page report, which was conducted to satisfy one of several benchmarks the IMF asked the Afghan government to meet in cleaning up the scandal, points to poor oversight by Afghan banking regulators, political interference in the criminal investigation and activities by a special judicial tribunal hearing the case that it said were "well outside the legal norms of criminal procedure."
The bank's failure and subsequent bailout represents more than 5 per cent of Afghanistan's gross domestic product, making it ‘one of the largest banking failures in the world,’ according to the report by the Independent Joint Anti-Corruption Monitoring and Evaluation Committee.
The report said ‘hundreds of millions’ were sent out of the impoverished nation where Afghan, US and NATO forces are fighting an 11-year-old war with Taliban and other militants.
"Every citizen in Afghanistan will bear the cost of the hundreds of millions of dollars required to secure deposits and the tens of millions of dollars required to deal with the aftermath," the report said.
"This is real money from the annual budget of the government that could be much better spent on other priorities, such as education, health care, infrastructure or security."
The Kabul Bank scandal is a saga about money-grabbing, weak banking oversight, lax prosecution, nepotism, political contributions and fraud.
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