Kabul Bank ‘Fraud’ to Be Probed Anew by Afghan Government

Afghanistan’s new president ordered a fresh investigation of the nation’s biggest financial scandal, the near collapse of Kabul Bank four years ago.

President Ashraf Ghani Ahmadzai ordered the attorney general to start the prosecution of shareholders and others involved in the case within 15 days, according to an e-mailed statement today from the presidential palace in Kabul.

The probe into the near collapse in 2010 of what was then the nation’s biggest commercial lender is the first major move to fight corruption in Afghanistan since the ouster of the Taliban government in 2001. The country is ranked 175 out of 177 in Transparency International’s Corruption Perceptions Index.

The government took over Kabul Bank in September 2010 after thousands of depositors rushed to withdraw their money after learning that the bank’s owners had lost funds that a U.S. government report said may total $850 million, or 94 percent of the company’s loans.

Ghani also ordered the central bank to summon in five days those who haven’t repaid loans and recover them. The bank’s founder Sherkhan Farnood and former Chief Executive Khalilullah Ferozi are in jail after their 2011 arrests on charges that included insider loans.

“This is a fair measure in the fight against corruption, and we will try to meet the deadlines,” Afghan central bank Governor Noorullah Delawari said by phone. “Such serious measures can help recover the rest of the loans,” he said.

The central bank has been able to recover more than $225 million from a total of $825 million of insider loans since the process of receivership began two years ago, Delawari said.

Ghani’s administratiion signed agreements with the U.S. and NATO in Kabul yesterday that will secure billions of dollars in aid for Asia’s poorest country and will keep foreign troops in the nation beyond this year to fight the Taliban.

The U.S. spent about $93 billion in military and economic assistance to Afghanistan from the Taliban’s ouster in late 2001 through September 2013, with an additional $6.1 billion budgeted for this year, the Congressional Research Service said in May.

Ghani ordered the finance ministry to renew efforts to sell the bank, which was renamed the New Kabul Bank after it was bailed out by the government. There were no takers for the bank at a sale last year.

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