PwC accused over $900m Afghan bank scandal

Finance Minister says auditors were negligent in signing off Kabul Bank accounts

Kabul

The Pakistani branch of PricewaterhouseCoopers (PwC) is likely to be sued by the Afghan government over the collapse of a bank amid allegations of massive fraud in which $900m (£560m) went missing. The Independent has learned that a confidential report into the demise of Kabul Bank is severely critical of the performance of auditors AF Ferguson & Co, which cleared the institution's accounts for a prolonged period, leaving the way open for legal action.

The scandal was viewed as a particularly shocking example of the corruption that has become endemic under Hamid Karzai's government. One of the President's brothers, Mahmoud, was among those forced to deny complicity following accusations by a former chairman of the bank.

An investigation by forensic accountants, Kroll Associates, reveals "at a minimum level serious negligence" by PwC, according to the Afghan Finance Minister Hazrat Omar Zahkiwal. "It is likely there will be legal action, we think there is enough there in the report for this to take place," he said. "It is true that our Central Bank has a supervision branch which failed in this case. But PwC gave Kabul Bank a clean bill of health year after year and this misled the Central Bank." The British Government is providing about $4.5m towards the inquiry and an asset-recovery programme by Kroll, whose report was handed to the Afghan government in March. "What happened certainly does not look good on the government," Dr Zahkiwal said. "But even if we could have suspected our own supervisory system, we did not expect such a respectable international accountants like PwC's inability to do the job."

A memorandum from USAid, part of a previous report into the collapse by the Office of Inspector General in Washington, stated that a team from PwC had failed to identify any wrongdoing, a factor which "may have acted to delay understanding of the gravity of Kabul Bank's condition both among the examination staff and the international community." Under international pressure, President Karzai had set a deadline for the bank's principal debtors to acknowledge their responsibility and agree repayment plans, with the offer that they would thus avoid having to pay interest in the sums involved.

Proceedings are under way to seize assets in Afghanistan and Dubai, but Dr Zahkiwal acknowledged that so far only about $100m has been recovered. He insisted that progress was being made in pursuing debtors, albeit slowly. Part of the problem has been tracing assets moved abroad, including to e Gulf states, the US and western Europe.

President Karzai had also agreed to the setting up of a special court to carry out a fraud trial although, so far, there have been no significant prosecutions and no details about legal proceedings.

Sherkhan Farnood and Khalilullah Ferozi, respectively the bank's former chairman and chief executive, were arrested last year. Rahmatullah Nazari, the Deputy Attorney-General, declared that they will face trial for fraud, allegations they deny. It has been claimed that some of those arrested have been seen on the streets of Kabul. "Some of these people were released during the day," Dr Zahkiwal said. "They said they would help in recovering the money. Some spent time doing other things as well. But all attempts had to be made to get back as much as possible".

Mr Farnood had claimed that Mahmoud Karzai was one of those who had taken out loans from Kabul Bank. Mr Karzai has maintained that he repaid all loans. He stressed that he had strongly advised against some investments made by the bank and that he was prepared to co-operate with any inquiry.

In a statement yesterday via PwC,AF Ferguson & Co, said: "We are not in a position to comment... as we have not been involved in the investigation and are not privy to its findings."

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
Angelina Jolie with her father Jon Voight
people
News
Bill Kerr has died aged 92
people
Sport
footballPremiership preview: All the talking points ahead of this weekend's matches
Arts and Entertainment
Warner Bros released a mock-up of what the new Central Perk will look like
tv'Friends' cafe will be complete with Gunther and orange couch
News
Keira Knightley poses topless for a special September The Photographer's issue of Interview Magazine, out now
people
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
News
i100
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
Life and Style
tech
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Java Developer - 1 year contract

£350 - £400 Per Day: Clearwater People Solutions Ltd: Our client based in Cent...

Junior Analyst - Graduate - 6 Month fixed term contract

£17000 - £20000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

SAS Business Analyst - Credit Risk - Retail Banking

£450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...

Project Manager - Pensions

£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone