Kabul Bank—Afghanistan's largest financial institution—functioned as a "well-concealed Ponzi scheme" from its very beginning, according to a confidential forensic audit and reported by Matthew Rosenberg of The New York Times.
The audit asserts that "Kabul Bank had little reason to exist other than to allow a narrow clique tied to President Hamid Karzai ’s government to siphon riches from depositors, who were the bank’s only substantial source of revenue," according to Rosenberg.
More than 92 percent of the lender’s loan portfolio — $861 million, or roughly 5 percent of Afghanistan’s annual economic output at the time — had gone to 19 related people and companies by the time that regulators seized the bank in August 2010.
Ben Farmer of The Telegraph notes the audit found that Mahmoud Karzai, the president's brother and a bank shareholder, received $30.5 million. Karzai disputes that total and denies any wrongdoing.
The bank's executives reportedly kept two sets of books, hid loans, routed illicit cash to Dubai through a money exchange controlled by the banks founder, forged documents for fictitious companies, and even offered raffle prizes including houses, cars and jewelry to those who opened a "Bakht account."
Ironically, the bank has been promoted by Afghan and U.S. officials as a paragon of how Western-style banking could transform a war-ravaged economy. The U.S. paid the salaries of hundreds of thousands of soldiers, police and teachers through it.
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