Kabul Bank fraud investigation efforts have been hampered by the persistent political interference, according to an 87-page report prepared by an independent corruption watchdog at the request of International Monetary Fund. The report reveals that Afghani president Hamid Karzai's aides, bank officials, and their relatives, became rich by raising $861 million in fraudulent loans. In fact, president Karzai dictated who the prosecutors should charge, and who should be kept out of the issue.
The report was released on Wednesday November 28th. The findings reinforce the belief that corruption is rifle in Afghanistan. If the criminals involved in the fraud are not punished, it could be difficult for the western countries to donate more funds to the ailing nation. The bank collapsed in 2010, and its bailout amount was equal to 5 percent of Afghanistan's GDP. Kabul Bank goes down as one of the biggest bank frauds in the world. The Independent Joint Anti-Corruption Monitoring and Evaluation Committee, which prepared the report, found that hundreds of million of dollars were carried out of the country in air plane food trays.
The Kabul Bank scandal is the story of poor banking oversight, money-grabbing, nepotism and fraud. The bank was established in 2004, and soon became the largest financial institution in the country. The report says that the bank was being run like a Ponzi scheme.
The special judicial tribunal has been found to be involved in activities "outside of the legal norms of the criminal procedure." The tribunal held off-the-record meetings with the potential witnesses, the accused individuals, and shareholders.
The report says that when the commission set up by Karzai to investigate into the scandal published its own report, it “publicly announced that the president would decide who to prosecute based on its recommendation.”
The Independent Joint Anti-Corruption Monitoring and Evaluation Committee also criticized the attorney general for not conducting substantial investigation into the bank until April 2011, almost a year after the bank collapsed and five months after it was asked to start a criminal investigation.
The criminal indictment, which was published in May 2011, lists 20 people who benefited from the fraud. They were charged with money laundering, opening accounts under fake names, and misuse of authority. However, the indictment didn't name the people at accounting firms that created fake documents for Kabul Bank, airline employees who carried money out of Afghanistan, or shareholders who raised loans at zero percent interest "with no intention of repayment."
The report says that the major factor that impeded investigation process was political interference. The decision of who to indict was taken at a political level in 2011, not by the prosecutors at the attorney general's office. According to the report, $861 million, or more than 90 percent of Kabul Bank's loan book, went to just 19 companies and individuals. The list includes, Sherkhan Farnood, former chairman of the bank; ex-CEO Khalilullah Feroz; Mahmoud Karzai, brother of president Hamid Karzai; and Hassan Fahim, brother of Vice President Mohammad Qasim Fahim.
The political committee charged the former bank executives, but set free the brothers of Karzai and Fahim. The report says that Kabul Bank was being operated with two sets of books: one to show the regulators, and another one that recorded how the politicians, their relatives and bank executives were fattening their wallets. The loans they raised were rarely repaid.