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Corruption, Abuse in $900 Million Kabul Bank Fraud

By Jack Phillips
Epoch Times Staff
Created: November 28, 2012 Last Updated: November 29, 2012
Related articles: World » South Asia
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Pedestrians walk past the main branch of The Kabul Bank in Kabul, Afghanistan on Sept. 4, 2010. (Massoud Hossaini/AFP/Getty Images)

Pedestrians walk past the main branch of The Kabul Bank in Kabul, Afghanistan on Sept. 4, 2010. (Massoud Hossaini/AFP/Getty Images)

Officials and collaborators at Kabul Bank, the largest bank in Afghanistan, embezzled $900 million out of the country via the misuse of power and political interference, according a new report commissioned by the Afghan Finance Ministry.

The report, which was published Wednesday by an independent monitoring agency, said the scheme cost Afghanistan around 5 to 6 percent of its Gross Domestic Product (GDP), while a small group of Afghans became extremely wealthy.

“A group of shareholders and related parties capitalized on the regulatory vacuum in Afghanistan by using a scheme to recklessly divert Afghans’ savings to their own personal and business ventures,” the report stated.

The money was used to fuel the embezzlers’ opulent lifestyles. Although bank purchases were not well documented, investigators found receipts for the purchase of some 250 cars and motorcycles over a five-year span worth $8.4 million and travel expenses worth more than $6 million. Bank officials received massive salary increases over several years.

Around 42 percent of Afghanis live below the national poverty line and food insecurity is widespread, according to research commissioned by the International Fund for Agricultural Development.

The Independent Joint Anti-Corruption Monitoring and Evaluation Committee (MEC), which published the report exposing the embezzlement, said the Kabul Bank scandal is merely a symptom of Afghanistan’s fundamental problems.

In the war-torn country, government and business corruption remains a significant challenge to the country’s development. In 2010, numerous Afghans pulled their money out of the bank and forced it to seek international lenders for bailout funds.

MEC said the bank’s embezzlement scandal highlights impunity for powerful Afghans.

Kabul Bank founder Sherkhan Farnood is also the owner of Pamir Airways. Airline workers were used to smuggle some cash out of Afghanistan. The money traveled on airline food trays and landed in the banks of more than two dozen countries. Ten airline employees with Pamir Airway were paid big sums to take part in the operation, the report said.

The scheme was uncovered by Afghan authorities, but in the spring of 2011 political pressure forced the attorney general’s office to amend the indictment. Neither the pilots, nor the accounting officials who created false documents to hide the scandal, nor the shareholders who benefited in the scam were charged.

Interpol (the International Criminal Police Organization) issued an arrest warrant for Farnood “for illegal banking activities, organizing a criminal group [and] money-laundering” but Afghan officials ignored the request for years, Drago Kos, the chair of the MEC, told British publication The Guardian.

Both Farnood and bank chief executive Khalilullah Fruzi are currently under house arrest and cannot leave the country.




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