An Afghanistan court has convicted 21 people involved in fraud at Kabul Bank. The Bank was declared insolvent in 2010, and it has since been revealed that the institution served as little more than a Ponzi scheme. The bank’s purpose was to enrich well connected customers at the expense of depositors.

Kabul Bank

92 percent of the bank’s loans went to just 19 individuals. The total amount of these loans was $861 million. The sum amounts to around five percent of the entire Gross Domestic Product of Afghanistan. One of the banks most prominent lender was Mahmood Karzai, the brother of Afghanistan’s President. It is clear that the borrowers were never expected to pay back the loans.

None of those who borrowed the money have been charged, despite their complicity in the crime. A 2010 bailout of Kabul Bank cost the Afghan government more than $80 million. The sum is approximately equal to the government’s entire annual revenue.

The former CEO of the bank, Khalilullah Ferozi, was sentenced to five years in prison in today’s ruling. He was also ordered to pay $530 million to a fund dedicated to alleviating  the effects of the fraud on ordinary Afghans. Sherkhan Farnood, the bank’s former chairman, was ordered to repay $278 million.

The move by Afghan prosecutors, and the response of Western observers, many of whom called the sentences light, might be seen in the West as a sign of lackluster response on this side of the world to the global financial crisis. While there is a definite case to be made for the prosecution of those responsible for that crisis, this is a different case entirely.

The fraudulent nature of the bank, coupled with the simplicity and audacity of the fraud, makes this a case of malfeasance, and it was not difficult to prove for Afghan prosecutors. Fraud on the part of Western investment banks, or bond regulators would be much more difficult to prove because of the complexity of the transactions and instruments involved.

Afghanistan has rid itself of some of its most malevolent financial operatives, but the country clearly has many more to deal with. None of those who took the money have been prosecuted. The country’s nepotism, regionalism, and rampant drug industry will continue to hurt it in the years ahead. Today’s ruling provides a modicum of relief for Afghans, but the underdeveloped Central Asian country has a long road ahead.