Narco-State Run Kabul Bank Is One Major Ponzi Scheme, Surprised?!

Πηγή: StratRisks
Nov 30 2012

COMPLEX scheming by the authorities and shareholders of Kabul Bank to siphon hundreds of millions of dollars from savings accounts caused its collapse in 2010 and nearly took the Afghan financial system down with it, according to a report on Wednesday.

Weak regulatory oversight missed the early warning signs, the report found, and there was “inappropriate political interference” during the investigations into the bank’s fiasco.

The review by Independent Joint Anti-Corruption Monitoring and Evaluation Committee said a number of shareholders, administrators, employees, and others participated in a complex scheme to divert depositor funds beginning in 2006.

They led “a sophisticated operation of fraudulent lending and embezzlement through a loan book scheme” resulting in the loss of $935m funded mostly from customer’s deposits, the report said.

It detailed for the first time how the funds were misappropriated. Tactics included unjustifiable disbursements, fake capital injections, salaries paid to non-existent employees, payment for fake assets and political contributions.

Kabul Bank was the biggest bank in Afghanistan at the time of its collapse, with a 34% stake in the country’s banking sector. More than 1-million people were depositing their money. The failure and government bail-out amounts to 5% of Afghanistan’s gross domestic product.

The report found that more than 92% of Kabul Bank’s loan book — approximately $861m — was fraudulently disbursed to 12 individuals and seven companies. One set of books was allegedly prepared for regulators while another kept track of the real distribution of the money.

The bank officials also used fake stamps, forged documents and statements, some of which were provided by fake accounting firms, the report said.

The bank was effectively running a ponzi scheme, MEC co-chairman Drago Kos said.

At least $900m — which includes a large chunk of $861m bad debt — was siphoned from Kabul Bank through wire transfer that went to the accounts of parties or businesses related to the suspects and shareholders, Mr Kos said.

According to the report, the pilots were paid $320,000 in salaries between March 2008 and November 2010 under the heading “Pilots of Cash Delivery”.

The inquiry also found evidence that regulatory bodies “who should have been completely independent” were “deferring questions to the political authorities”, Mr Kos said.

The committee’s report criticised the Afghan Attorney General’s office for delaying the start of the formal investigation for more than a year, saying “political decisions were made by high-ranking officials” in office, including who to indict and what the indictment should state.

There was no evidence of Afghan President Hamid Karzai being directly involved. The brother of Vice-President Marshal Fahim benefited due to one of Mr Karzai’s decisions, an official said on condition of anonymity.

Mr Fahim’s brother was one of two “politically exposed” shareholders in the Kabul Bank, the official said, the other being Mr Karzai’s half-brother.

Like several others, they paid for their shares in the company with unsecured loans from the bank itself, according to the report.