Report - United States Department of Defense

UNCLASSIFIED
review committee rejected because the bidder failed to meet “criteria minimums as specified in
Expression of Interest (EOI) and tender documents.” In a brief press conference, MoF Director
General for Treasury Aqa and Da Afghanistan Bank Governor Delawari announced the rejection
of the bids and outlined the options for the near future: to re-advertise; to sell to an interested
bank following a one-to-one negotiation; or to liquidate the bank.
On March 5, 2013, the Kabul Bank Special Tribunal convicted former Kabul Bank Chairman
Shirkan Farnood and former Kabul Bank CEO Khalilullah Ferozi of “breach of trust,” and each
was sentenced to five years in prison. They were fined a combined total of more than $800
million. Farnood and Ferozi were acquitted, however, of more serious charges of embezzlement,
forgery, and money-laundering, and thus are under no real legal obligation to pay back fines
imposed by the Special Tribunal that handled the case. The other charges would have carried
longer prison terms and increased the possibilities of enforcing fines and recovering assets held
abroad. Nineteen other defendants, who were low-level Kabul Bank employees or Central Bank
regulators, were also found guilty of misusing official authority and failure to inform relevant
authorities and received fines and/or prison sentences. Given the implications of these sentences,
Afghan prosecutors have appealed the verdict and are prepared to seek harsher sentences.
A key indicator of the Tokyo Mutual Accountability Framework calls for asset recovery and
legal accountability for those responsible for the crisis. The next steps in the process will
address how government authority can be constituted to confiscate assets where they exist. The
case led Afghans to seek technical advice in strengthening their banking laws, fiscal control, and
the role of the Central Bank in supervising Afghanistan’s financial institutions.
The Kabul Bank Crisis resulted in widespread loss of confidence in the banking sector and
highlighted significant weaknesses in the industry. These weaknesses cover all significant areas
of bank stewardship and will continue to require extensive reforms to address weak financial
supervision, corruption, overexposure, and security concerns. Presently, the Banking Law and
banking framework, which aim to strengthen central bank regulations, has been reviewed by the
Council of Ministers and is now in Parliament for review. However, until corruption – and the
perception of corruption – within the banking sector are addressed, public confidence in the
Afghan banking system will remain deficient.
3.7: COUNTER-CORRUPTION AND TRANSPARENCY
The international community continues to press for significant anti- and counter-corruption
reforms through “mutual accountability,” so that donor money is conditioned to specific actions
by the Afghan ministries. ISAF is also engaged with the international community and the
Afghan government to illustrate the need for a coherent system of laws, regulations, and offices
to ensure the country’s extractive industries are successful and operate in an environment of
transparency and accountability. However, effective progress remains elusive due to a range of
factors, including the deeply embedded nature of societal corruption, individual and group efforts
to maximize wealth, and the ability and willingness of those in power to prevent effective
investigations, arrests, prosecutions and punishments.
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