Kabul Bank Missing $900 Million
The New York Times reports:
Fraud and mismanagement at Afghanistan’s largest bank have resulted in potential losses of as much as $900 million — three times previous estimates — heightening concerns that the bank could collapse and trigger a broad financial panic in Afghanistan, according to American, European and Afghan officials.
The extent of these losses make it clear that keeping the bank afloat — something the government has said it is determined to do — would require large infusions of cash from an already strained budget.
Banking specialists, businessmen and government officials now fear that word of Kabul Bank’s troubles could prompt a run on solvent banks, destroying the country’s nascent banking system and shaking the confidence of Western donors already questioning the level of their commitment to Afghanistan.
The scandal has severe political and security implications. Investigators and Afghan businessmen believe that much of the money has gone into the pockets of a small group of privileged and politically connected Afghans, preventing earlier scrutiny of the bank’s dealings.
The spotlight on how political and economic interests in Afghanistan are intertwined threatens to further undermine President Hamid Karzai’s government. The bank is also the prime conduit for paying Afghan security forces, leaving the American military, which pays the majority of the salaries, looking for new banks to process the $1.5 billion payroll.
As Afghan regulators struggle to find out where the money went, many officials and international monitors concede that the missing millions may never be recovered, raising questions of how the losses could be replaced to keep the bank from failing.
Afghan officials and businessmen have said the money was invested in a real estate bubble that has since burst in Dubai, as well as in dubious projects and donations to politicians in Afghanistan. Millions of dollars have yet to be traced, and some of the money seems to have gone to front companies or individuals and then disappeared.
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