Corruption Allegations Surround Kabul Bank

The Central Bank of Afghanistan has taken over the country's leading private bank amid a new corruption scandal involving allies of President Hamid Karzai. For more, NPR's Robert Siegel talks to Joshua Partlow of the Washington Post.

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ROBERT SIEGEL, host:

Kabul Bank is the biggest private bank in Afghanistan and it's now under the control of that country's central bank. Kabul Bank's losses and questionable investments led President Hamid Karzai to act against the politically connected bank, which handles payroll for Afghanistan's army, its schools and other institutions.

Correspondent Joshua Partlow of The Washington Post writes about this, and he joins us now from Dubai. And, first, Josh Partlow, tell us more about Kabul Bank and how important it is in Afghanistan.

Mr. JOSHUA PARTLOW (Correspondent, The Washington Post): Well, Kabul Bank is definitely very important in Afghanistan. It's the largest private bank. It has taken in more than a billion dollars in deposits and has more than a million customers, has branches in every province around the country.

It's also very politically connected. Some of the closest relatives and allies of the president are shareholders and business partners with Kabul Bank and theyve managed to parlay that political connection into vast success in its early years as a bank.

SIEGEL: And what did Kabul Bank do exactly that led to President Karzais sending in the central bankers?

Mr. PARTLOW: The problems at Kabul Bank have been known for some time. Earlier this year, our newspaper, The Washington Post, reported that the chairman had been buying up several luxury houses in Dubai and giving them basically to relatives and supporters of the president.

When times were good this wasn't attracting a lot of attention. But when the Dubai property market crashed, Kabul Bank suffered significant losses and that has led to a power struggle in the last several weeks within the bank. And that tension, some say led certain shareholders in Kabul Bank to give information to investigators about others. And once enough of a case was compiled against the bank, then the president was essentially forced to act.

SIEGEL: I guess this raises a glass half full or half empty question: Is this story a measure of how corrupt things are in Afghanistan or of some new vigilance in the move against corruption there?

Mr. PARTLOW: Right. It could very well be both. I mean, this is one of - many people believe, one of the more corrupt institutions in Afghanistan, but it's also perhaps the first time that President Karzai has taken a firm and proactive, you know, decision to address that corruption in a bank that has ties to his family and supporters.

So some people, including American officials, believe this is a positive development. The central bank is acting as a regulator and trying to reign in a bank that was sort of out of control. So there is perhaps a silver lining in this situation, but it's also very dangerous because right now there's potentially a run on the bank and people in Kabul are trying to get their money out.

SIEGEL: Americans hearing you right now might well be wondering, was this originally U.S. aid money that went from here to Afghanistan into the bank and then to buy luxury villas in Dubai? How do you answer that?

Mr. PARTLOW: That's a good question. I think this is primarily Afghan money, from what I've been told. The bank has more than a million depositors. You know, but it also pays, like you mentioned at the beginning, the salaries of the Afghan army and police, which the U.S. government supports to a large degree. So it could be a mixture of both Afghan and American money at play here.

SIEGEL: Well, I mean, is there a U.S. depositor here who has a, you know, an interest in what happens to this bank?

Mr. PARTLOW: I think the main U.S. interest at this point is preventing Kabul Bank from failing. I mean, there's been a lot of people inside and outside the bank in the last couple days since this central bank decision that have speculated that the end is near for Kabul Bank. And a collapse of Kabul Bank would be catastrophic for the economy and for the fight against the Taliban.

SIEGEL: Joshua Partlow, thanks for talking with us.

Mr. PARTLOW: Thank you very much.

SIEGEL: Joshua Partlow is a foreign correspondent for The Washington Post. He spoke to us about Kabul Bank from Dubai.

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