Afghanistan's Central Bank has expanded an investigation into Azizi Bank to include a forensic audit.
Second Afghan bank in inquiry
An investigation by the Afghan central bank into alleged improprieties in the country's financial sector has expanded to include a second bank, the founders of which have ties to the Dubai property market, The National can reveal.
Azizi Bank, the country's second-largest financial institution, has been drawn into the inquiry that originally focused on Kabul Bank, the biggest institution and its largest private bank.
Kabul Bank was taken over by the central bank late last year and injected with funds after depositors rushed to withdraw their savings. That followed disclosures that bank executives had invested more than US$150 million (Dh550.9m) in property in Dubai, mainly in villas and flats on Palm Jumeirah.
The inspector general of the US Agency for International Development (USAID) said in a report last week that $850m of the bank's assets, or 94 per cent of its total assets, were loaned to shareholders and politically connected people.
Da Afghanistan Bank, the central bank, has widened its forensic audit of Kabul Bank to include Azizi Bank, according to the USAID report, which detailed the failings of the US government and the accountancy company Deloitte to detect signs of alleged corruption at Kabul Bank. Azizi Bank's founders have ties to the UAE property market through a separate company, Azizi Investments, which bought land in Dubai.
But Farhad Azizi, son of the company's chairman Mirwais Azizi and one of its five main shareholders, said the money invested in those projects came from the selling part of the family's oil and gas businesses.
Farhad Azizi said there were "no improprieties that we know of" at Azizi Bank and it had not engaged in the same practice of issuing large loans to shareholders that led to the near-collapse last year of Kabul Bank.
"Azizi Bank is running as usual," he said. "Strong internal controls are vital and existed from day one. My father is the main shareholder."
Mr Azizi added the bank "welcomed" the audit.
Billboards for Azizi Investments's property projects were prominent during the latter end of Dubai's property boom. The company launched projects including Azizi Diamond and Azizi Crystal on Palm Jebel Ali.
Mohammed Mustafa Massoudi, the director general of Financial Transactions and Reports Analysis Center of Afghanistan, said the government would issue a tender within the coming months to companies for the forensic audits of Kabul Bank and Azizi Bank.
Mirwais Azizi may also have to relinquish his position as chairman as part of a set of new regulations preventing shareholders from holding executive positions. Those have yet to be finalised, his son said.