x Abu Dhabi, UAEThursday 20 July 2017

Report claims bank trouble appeared as early as 2008

A new report from the US government has said that Deloitte failed to detect signs of corruption long before the collapse of Kabul Bank.

Professional advisers to the US and Afghan governments were warned as early as February 2008 that something was amiss at Afghanistan's largest financial institution, a report says.

Soon after performing an examination at Kabul Bank and another institution in February 2008, an adviser from the company BearingPoint received two death threats, the report stated.

The threats were taken so seriously that the adviser left the country and BearingPoint, which was working on behalf of the US Agency for International Development (USAID), stopped on-site examinations.

The revelation came in a report from the office of the inspector general of USAID, which conducted an investigation after the near-collapse of Kabul Bank last year.

Thousands of depositors began withdrawing their savings after more than US$150 million (Dh550.9m) of allegedly improper investments in Dubai property were disclosed to the Central Bank of Afghanistan by bank executives.

USAID last week terminated part of a contract with the international accountancy firm Deloitte as a result of the report.

Deloitte acquired the public sector units of BearingPoint in 2009, giving it control of a $92m contract to provide advice and training in regulation to the central bank.

The 23-page report shows how Deloitte's team and officials in the US government failed to act on several occasions after detecting signs of improprieties.

The end result is that $850m of the bank's assets, or 94 per cent of the total cash at the bank, were loaned to shareholders and politically connected people, according to the inspector general of USAID.

This was allegedly done through fictitious companies and practices that the report said were of a "criminal" nature.

Deloitte said it had not failed to perform according to the agreed boundaries of its contract.

"Deloitte has acted appropriately and performed consistent with its contractual obligations, and we believe the management comments of USAID demonstrate this," it said.