Afghan graft buster vows to crack Kab­ul­bank scan­dal

The Pak Banker - - Front Page -


The chief in­ves­ti­ga­tor prob­ing Afghanistan’s big­gest fi­nan­cial scan­dal says he will stop at noth­ing to put the per­pe­tra­tors in a multi-mil­lion dol­lar bank fraud be­hind bars.

As a re­sult, Judge Sham­sul Rah­man Shams wor­ries for his own safety.

Even for a coun­try ranked as one of the world’s most cor­rupt, the theft of about $935 mil­lion (Dh3.43 bil­lion) from the Kab­ul­bank two years ago and the sub­se­quent foot-drag­ging in pros­e­cut­ing those re­spon­si­ble un­der­lines con­cerns about Afghanistan’s abil­ity to man­age its fi­nances and en­force the rule of law.

The tough-talk­ing Shams, con­scious his coun­try is un­der close scru­tiny over how it han­dles the em­bar­rass­ing case, says no-one — re­gard­less of po­lit­i­cal or busi­ness con­nec­tions — will be spared in his in­ves­ti­ga­tions.

“We are flex­ing our mus­cles with the big guys who could eas­ily get rid of us, but we are com­mit­ted to solve this case,” said Shams, who heads a spe­cial court in­ves­ti­gat­ing 22 peo­ple in the scam that brought the com­mer­cial bank to its knees.

“We know it’s a dan­ger­ous task but we’re not scared. I don’t have a body­guard and as soon as I an­nounce the rul­ings I’ll be in trou­ble,” Shams told Reuters in his bunker-like of­fice in a base­ment of a for­ti­fied Kabul house.

The bank’s col­lapse trig­gered a fi­nan­cial cri­sis, civil dis­or­der and a run on de­posits, wor­ry­ing for­eign donors and em­bar­rass­ing the US and Afghan gov­ern­ments, which had touted its cre­den­tials as a mod­ern lender in­te­gral to de­vel­op­ing a tiny econ­omy crip­pled by war and mis­man­age­ment.

The government bailed out the coun- try’s then big­gest lender, and re­launched it as the state-run New Kabul Bank. Among those who have been linked to the scan­dal, ac­cord­ing to in­ves­ti­ga­tors, are the bank’s cur­rent and former chiefs, its founder and the brothers of Pres­i­dent Hamid Karzai and his first vice-pres­i­dent, Mo­ham­mad Qasim Fahim, who were both share­hold­ers.

A report re­leased on Wed­nes­day de­tailed for the first time al­le­ga­tions of poor or re­luc­tant law en­force­ment, po­lit­i­cal in­ter­fer­ence, ques­tion­able over­sight by for­eign au­di­tors and in­sti­tu­tion­alised fraud by Kab­ul­bank of­fi­cials.

The out­come of the case is seen as a cru­cial barom­e­ter of Afghanistan’s com­mit­ment to sta­bil­is­ing the econ­omy and its fight against cor­rup­tion, two years out from the with­drawal of most for­eign troops and a pos­si­ble wind­ing down of bil­lions of dol­lars in in­ter­na­tional aid.

The probe by the government-funded In­de­pen­dent Joint Anti-Cor­rup­tion and Eval­u­a­tion Com­mit­tee named no in­di­vid­u­als but re­vealed two sets of books were kept by Kab­ul­bank, one to sat­isfy reg­u­la­tors and an­other track­ing the real dis­burse­ment of funds through a loan-book scheme for proxy bor­row­ers. They used forged sup­port­ing doc­u­ments, fake busi­ness stamps and state­ments pro­vided by ac­count­ing firms com­plicit in the scam.

The report was also crit­i­cal of “clean as­sess­ments” from in­de­pen­dent au­di­tors, which in­clude Dubai-based Behl, Lad and Al Sayegh and Pak­istan-reg­is­tered AF Fer­gu­son, a com­pany that comes un­der the um­brella of Price­wa­ter­house­coop­ers (PwC). AF Fer­gu­son did not ap­pear to fol­low up on breaches iden­ti­fied dur­ing cen­tral bank ex­am­i­na­tions, the report said.

Con­tacted by Reuters for com­ment, a PwC of­fi­cial said in an email AF Fer­gu­son’s pol­icy was not to dis­close de­tails of its clients or the projects that it has worked on.

The report also showed how stolen funds were con­cealed — dis­guised as large ex­penses, bonuses, rents and salary pay­ments to ghost staffers. Some funds were si­phoned out of the coun­try ei­ther elec­tron­i­cally or in cash aboard Pamir Air­ways, owned by share­hold­ers linked to the bank.

Those han­dling the bank in­ves­ti­ga­tion have been ac­cused of be­ing slug­gish. Shams, the judge lead­ing the probe, said the process is ex­tremely com­plex, but crim­i­nal pro­ceed­ings would be wrapped up “very soon”. “We want to re­as­sure ev­ery­one that we’ll spare no one,” he added.

But two have al­ready been spared thanks to a pres­i­den­tial de­cree in April that granted im­mu­nity from pros­e­cu­tion to any of those im­pli­cated who re­turned funds within two months. The two who re­sponded were Mah­moud Karzai, the pres­i­dent’s brother, who has paid back $22 mil­lion and Haji Hasseen, the vice-pres­i­dent’s sib­ling, who re­turned $18 mil­lion, ac­cord­ing to Shams. Both have de­nied any wrong­do­ing.

Only two of those charged with fraud are in de­ten­tion. They are bank’s founder Sherkhan Farnoon, and its former chief ex­ec­u­tive, Khalil Fruzi, who Afghan of­fi­cials be­lieve were the mas­ter­minds be­hind the scan­dal.

Five other sus­pects have fled the coun­try and the rest are on bail, in­clud­ing New Kabul Bank Chair­man Ma­sood Mousa Ghazi. Ab­dul­lah Dowrani, chief of the Fi­nan­cial Dis­putes Res­o­lu­tion Com­mis­sion, says around $140 mil­lion in cap­i­tal has been re­cov­ered, on top of more than $200 mil­lion in prop­erty as­sets and $218 mil­lion in debt to be re­turned by bor­row­ers.

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