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'Important symbolic act'

Interview: Gabriel DomínguezOctober 3, 2014

Afghan President Ashraf Ghani has reopened the inquiry into the Kabul Bank fraud scandal, to show that he intends to keep his promises of tackling corruption, analyst Martine van Bijlert tells DW.

In this Sept. 1, 2010, file photo, Afghan soldiers chat in front of the main office of Kabul Bank in Kabul, Afghanistan. A new report offers previously undisclosed details about how the owners of Kabul Bank and their friends and relatives got rich off $861million in fraudulent loans _ a Ponzi scheme using customer deposits that operated under nascent banking oversight in the war-torn country.
Image: AP

In one of his first decisions since taking office, President Ghani ordered the country's Supreme Court to reopen a multimillion-dollar bank fraud case "which has been lingering for a year, and assess the case as well as the money laundering cases in 45 days." Kabul Bank, which was Afghanistan's biggest private bank, collapsed in 2010 after media reports exposed massive high-level corruption and the misappropriation of more than 900 million USD - most of which was deposited by international donors.

In a sophisticated operation, fake companies which had been given loans by the bank managed to get the money out of the country. After the exposure of the fraud, Kabul Bank was placed in receivership and after a protracted process the two former heads of the bank were given jail sentences of five years each. However, brothers of then President Hamid Karzai and his then first vice-president, who were shareholders, were not prosecuted.

Martine van Bijlert, co-director of the Afghanistan Analysts Network, says in a DW interview that the reopening of the investigation is an important symbolic act, signaling that Ghani intends to keep his campaign promises of cleaning up the government and tackling corruption. She adds, however, that the big question now is whether the judiciary will handle the case differently than it has done in the past.

DW: How did the Afghan authorities initially deal with the scandal?

Martine van Bijlert: From beginning to end there was a great reluctance to deal with the Kabul Bank crisis. Most of what was done - the receivership of the bank, the enquiries, and the court case - was done under considerable international pressure. And this didn't always go down well.

Several senior government officials - then President Hamid Karzai, Finance Minister Omar Zakhilwal, head of the High Office of Oversight Azizullah Ludin – accused the international community of making a big fuss over what they thought was a relatively small problem. In the end there was a court case, but it put the blame only on the leadership of the Kabul Bank and the regulators in the Central Bank. At the same time, it let the politically well-connected shareholders, who had received huge illegal loans and had thought nothing of it, off the hook.

What were the broader implications of the scandal for the economy and political stability?

The Kabul Bank crisis shook the foundation of Afghanistan's banking system and illustrated how vulnerable an economy can be when it is poorly regulated and corrupted. It also put donor money flows at risk, when the International Monetary Fund (IMF) made its loan extensions dependent on how the government dealt with the bank's collapse. Politically it sparked a long process of damage control.

The fact that the brothers of the president and first vice-president were among the bank's shareholders of course attracted a lot of attention, but this wasn't just about the powerful protecting their relatives. It was rather about a system protecting itself and the rules of the game: If you have access to wealth and power, you're practically above the law.

How do you view the reopening of the Kabul Bank inquiry?

The decree, so soon after Ghani taking up office, is of course an important symbolic act. It signals that he intends to keep his campaign promises of cleaning up the government and tackling corruption.

But the scope of the decree is still relatively limited. He basically asks the institutions to do what they were supposed to do anyway, but haven't done yet: the court system needs to deal with the pending appeals case, the attorney general's office needs to implement the tribunal's primary verdict, and the New Kabul Bank management and a couple of other organs need to recover the bank's loans and assets and prepare the bank's renewed privatization. It doesn't explicitly add to what was decided in the past.

In this file Wednesday, Sept. 10, 2014 photo, Afghan presidential candidate Ashraf Ghani Ahmadzai speaks during a news conference at his resident in Kabul, Afghanistan. Ghani Ahmadzai was sworn in Monday, Sept. 29, 2014 as Afghanistan's new president, replacing Hamid Karzai in the country's first democratic transfer of power since the 2001 U.S.-led invasion toppled the Taliban.
The decree signals that Ghani intends to keep his campaign promises of cleaning up the government, says van BijlertImage: picture alliance/AP Photo/Massoud Hossaini

Who will lead the investigation and what does Ghani want to achieve with it?

The decree doesn't explicitly ask for a new investigation, although it mentions that the court needs to carefully look into the allegations of money laundering. The court and the attorney general's office might uncover new information while working on the appeal's case, but it seems that most facts are by now fairly well known. The question is whether they will use the already available information in a different way.

In terms of what Ghani wants to achieve, I am not sure at this point whether he has any specific outcome in mind. I think it's more a case of finding it unacceptable that this has been left pending for so long and wanting to send a signal to the institutions that they need to do their jobs.

What are the chances of this investigation succeeding?

The big question now is whether the judiciary will indeed treat the case differently than it has done in the past. Which is not just about the Kabul Bank, but about how power and protection works in general.

If there is indeed a more robust follow-up, it can mean two things. It can mean that the judiciary and the government are slowly shedding their patronage-based way of working. But it could also mean that the shift in power has simply left people who used to be politically protected, now unprotected - without fundamentally changing the principles of cronyism. And realistically speaking, it's not going to be very easy to change that.

Martine van Bijlert is co-director of the Afghanistan Analysts Network.