www.nakedcapitalism.com -- The New York Times, in a story entitled “Afghanistan Tries to Help Nation’s Biggest Bank” issued the following correction:Correction: September 4, 2010An earlier version of this article, citing American and Afghan officials, erroneously stated that the United States would contribute money to help the Kabul Bank. American officials say the United States is providing technical assistance but no funds for the bank.The problem is that the “earlier version” was correct – the correction is incorrect. Kabul Bank has been revealed to be a “control fraud.” Control frauds occur when those that control a seemingly legitimate entity use it as a “weapon” to defraud. Control frauds cause greater financial losses than all other forms of property crime – combined. Control frauds can also cause immense damage to a nation because they are run by financial elites that curry favor from political elites. The result is that they are often able to loot “their” banks for years with impunity. They also degrade the integrity of the entire system.Kabul Bank is a typical example of a crude variant of control fraud at a major bank. Systems of crony capitalism, such as Afghanistan, inherently create an intensely “criminogenic” environment that produces epidemics of control fraud in the public, private, and non-profit sectors. Kabul Bank, like the (originally Pakistani) Bank of Credit and Commerce International (BCCI) – better known to regulators as the “Bank of Crooks and Criminals International” is reported to have helped everyone – corrupt Afghani government officials, corrupt business leaders, and the Taliban laundering its drug profits to, in part, buy weapons. Like BCCI, Kabul Bank’s managers’ reported frauds and self-dealing blew up the bank by causing massive losses. (If you believe that Kabul Bank is the only bank like this in Afghanistan you are consuming too much of Afghanistan’s leading export.)
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