Bank's Woes Reveal Tensions Over Afghan Corruption Alleged corruption involving a private bank in Afghanistan reportedly benefited President Hamid Karzai's relative. The government has responded quickly to probe the bank's troubles. But some analysts say the reaction is more about politics than finding ways to eliminate corruption.

Bank's Woes Reveal Tensions Over Afghan Corruption

Bank's Woes Reveal Tensions Over Afghan Corruption

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Afghans walk past a branch of Kabul Bank in the capital on Wednesday. Shareholders met this week to decide the fate of the bank after suspected irregularities raised concerns over the country's biggest private financial institution. Ahmad Massoud/AP hide caption

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Ahmad Massoud/AP

The issue of corruption in Afghanistan came to a head this month when thousands of panicked citizens rushed that country’s top private bank to withdraw their money.

The run was sparked by reports that the bank had used account holders’ funds to finance questionable deals, including the purchase of luxury homes in the Arab emirate of Dubai. The deals reportedly benefited Afghanistan’s elite, including the brothers of the Afghan president and first vice president.

Those allegations prompted some of the swiftest action to date by President Hamid Karzai’s government against graft.

Afghanistan President Hamid Karzai speaking at a press conference in Kabul earlier this month. Jim Watson/AFP/Getty Images hide caption

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Jim Watson/AFP/Getty Images

Analysts say the Karzai administration's response was motivated in part by fear of civil unrest and more about domestic politics than finding ways to eliminate corruption.

Afghanistan’s Central Bank Chairman Abdul Qadir Fitrat has taken control of the country's top private bank.

"There have been irregularities at Kabul Bank and we are investigating," Fitrat says. "And once we find out that laws have been violated, we’ll deal with those violators with the full force of the law."

Fitrat isn’t keen to discuss what went wrong at Kabul Bank. Nor will he comment on reports by The New York Times and other news agencies about shareholders borrowing millions of dollars from Kabul Bank to start companies and buy real estate.

But he says he is bothered by what his investigators have found.

"Now we are in the process of transferring those deeds in the bank’s name, and individuals are cooperating. This should not have happened and unfortunately it did happen and it’s disturbing, it is disturbing," he says.

He says the Central Bank is now awaiting audits of Kabul Bank by the U.S. Treasury and the International Monetary Fund.

"We had difficulties in the past with Kabul Bank. Particularly, we didn't know they didn't reveal they purchased properties in Dubai," Firat said. "That's why eight months ago we requested an international audit from U.S. Treasury and from the International Monetary Fund, and the audit will hopefully come very soon."

A Treasury Department official denies that such an audit is underway.

Fitrat also asked Kabul municipal leaders to ban any sale or purchase of property in the capital by the bank’s largest borrowers, including the former chairman of the board.

Fitrat claims that his efforts have the full support of Karzai. "I think it is a high-profile case and I don’t think anybody can hide anything," he adds.

But that would be a first, say other Afghans on the front lines of the war on corruption. They say they are caught in a battle of wills between U.S. officials pressing for results to explain wasted aid money and top Karzai officials seeking to shield their own.

Security guards keep watch outside the main branch of the Kabul Bank on Sept. 5 after customers of Afghanistan's biggest private financial institution rushed to withdraw their money following allegations of corruption and mismanagement by executives. Massoud Hossaini/AFP/Getty Images hide caption

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Massoud Hossaini/AFP/Getty Images

As a result, only a few of the more than 100 cases of kickbacks, bribery, theft of government funds and other graft forwarded to the Afghan attorney general’s office have resulted in any serious prosecution.

Former prosecutor Abdul Karim Bekiran says he was blocked at every turn earlier this year as he investigated a former minister of religious affairs. The minister stands accused in the disappearance of travel funds.

Bekiran says he repeatedly asked the Afghan attorney general to sign a warrant to prevent the suspect from the leaving the country, but was rebuffed. The warrant was eventually signed, but only after the minister fled the country.

That led Bekiran to resign in frustration. He is now running for Parliament, believing it to be the only body able to hold Afghan government officials accountable.

An Afghan TV journalist, Shakeela Abrahimkhel, says corruption is creating a growing class divide in Afghanistan. She says laws aren’t enforced, resulting in billions of dollars in aid money being squandered. She also alleges that at the same time, every high-ranking Afghan government official has a house in Dubai.

Lower-level government workers learn from their higher-ups. They regularly demand bribes for services they are supposed to be providing free of charge, she says.

Abrahimkhel says corruption in Afghanistan is not limited to the Karzai government. She accuses the country’s Western partners of being equally immersed in graft and waste, especially when it comes to billions of dollars in development aid.

Karzai's chief of staff, Mohammad Umer Daudzai, agrees with that point. He says the president welcomes new rules on contracts announced this week by the top U.S. and NATO forces commander, Gen. David Petraeus.

But Daudzai adds that the international community must take more steps.

"We are demanding that all contracts that are given to Afghans should be declared -- people should know who got contracts from where. So that we know which government official or politician are getting contracts from the international community and whether these contracts ... are acquired through a transparent process or not," he says.

Daudzai flatly denies that Karzai or his top aides are blocking corruption investigations into their own practices. What they are doing, he says, is stopping malicious or unjustified prosecutions that amount to political attacks.

"Almost all those allegations that we see are part of politicization of corruption and that is what we are against," Daudzai says.

New rules being drafted to define limits for anti-corruption task forces could help achieve that, he says. Daudzai says his government also wants to make sure Americans training Afghan prosecutors don’t cross the line.