The U.S. Agency for International Development has canceled a contract with Deloitte in Afghanistan, saying the company’s consultants did not inform the agency about early signs of widespread corruption at the troubled Kabul Bank.
The Afghan bank suffered a run in September after a pattern of fraudulent loans and cronyism at the institution was uncovered, with $900 million in loans being unaccounted for. This led the International Monetary Fund to recommend last month that the bank be put into receivership and then sold off, as well as delay approving a program for Afghanistan. Subsequently, this lack of IMF support prompted the U.K. to announce last week its plans to defer the payment of 85 million pounds ($137.5 million) in aid to Afghanistan this financial year.
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USAID engaged Deloitte in August 2009 to advise executives at the Afghan Central Bank, which sets monetary policy and regulates all private banks, including Kabul Bank. The firm billed the U.S. government more than $657,000 monthly for the five experts it assigned to the project.
“Some of the Deloitte guys saw signals of corruption and fraud but didn’t tell” USAID, according to a senior U.S. official, who spoke to The Washington Post on condition of anonymity.
Michele Schimpp, USAID’s deputy director for Afghanistan and Pakistan affairs, said the agency severed the contract March 14 and that it intends “to make sure all of our technical assistance is as effective as possible.”
Deloitte spokesman Jonathan Gandal did not comment on whether the company’s experts saw early signs of the crisis at the bank.
“We were not Kabul Bank’s independent auditor,” he said in a statement obtained by The Washington Post. “Our services did not include supervising or conducting bank examinations at Kabul Bank prior to Kabul Bank being put in conservatorship in September 2010.”
According to Mark Dillen, a spokesman of USAID in Kabul, the U.S. did not pursue an oversight role over the Afghan banking sector.
“The U.S. does not, and indeed should not, have an operational role in supervising Afghan banks,” Dillen said to the Washington Post. “U.S. efforts are appropriately focused on capacity-building, particularly with regard to strengthening the integrity of the financial system.”
At present, Kabul Bank and Azizi Bank, the country’s second largest, are the subject of a sweeping forensic audit commissioned by the Afghan government.
Read more about U.S. development aid.
