Introduction President Karzai S April 4, 2012 Decree Gave Shareholders and Related Parties

1

Report on

Kabul Bank Asset Recovery

Prepared by the Government of the Islamic Republic of Afghanistan and Da Afghanistan Bank

December 21, 2012

Introduction

This report updates the September 26, 2012 report on Kabul Bank asset recovery. President Karzai’s April 4, 2012 decree gave shareholders and related parties until June4,2012 to repay their debts in full or be referred to a special tribunal. We continued to implement anasset recovery process for each of the beneficiaries (individuals or corporations) identified in the forensic audit report.

On October 30, 2012, President Karzai presided over a high level meeting which included the receivership, the attorney general’s office, DAB, the MOF, the judges of the Special Tribunal, and the FDRC to urge all involved in resolving Kabul Bankto expedite their work, implement the rule of law, settle remaining financial disputes, and move ahead with criminal cases. Specifically, he asked the receivership to finalize the settlement of Kabul Bank accounts and the criminal justice sector to begin legal proceedings.

Asset Recoveries, activities of the Kabul Bank Receivership, and status of New Kabul Bank

Asset recovery efforts have continued. Between September 15 and December21,2012 total cash recoveries amounted to $8.7 million, increasing total recoveries (Kabul Bank Conservatorship & Receivership)from $112.4million on September 15 to $121.2 million on December21,2012 excluding the proceeds of the sale of properties in Dubai in this period of around $7.1 million. There remain impediments to the recovery process that include difficulty finding buyers for some of the assets, in identifying legal documentation on property ownership, and limited progress in criminal cases to date. No additional properties have been taken in the fourth quarter.

Total claims against borrowers of the former bank as of August31, 2010 amounted to $1,011.2million. Of this amount, recoveriesup to December 21, 2012 have been $121.2million and $97.6million in reductions have been applied against the total claims, bringing the balance to $729.2million. In addition, clear title is held by the receiver of approximately $30 million of assets taken over outside of Afghanistan. On 23 December 2012, all remaining Dubai properties were sold at auction. The sale will bring more than US$30million. The exact value would be credited to recovery account after completion of formalities subject to ratification of existing rental agreements. To date no assets have been frozen or confiscated.

Since our previous report, the receivership has made considerable progress in settling all accounts related to Kabul Bank and New Kabul Bank, providing us with a more accurate estimate of assets owned by the receiver; therefore a more accurate idea of the amount to recover.The estimate of total claims as of August 31, 2010 $1,011.2 million is significantly larger than the claims of $935 million, reported in September, because of the addition of significant non-loan claims to the total (that include unauthorized cash disbursements and expense claims). We continue to seek technical advice in improving our asset recovery efforts.

Also the liquidation is going to be finalized soon after completion of assetdisposition, a settlement process was undertaken, New Kabul Bank has been offered for sale, and expressions of interest have been solicited and received from five parties. A seminar profiling New Kabul Bank and the Afghan banking sector and economy was held by the Governor of DAB in cooperation with the ministry of finance. This seminar was held in UAE on November 14, 2012. Potential investors are now conducting their due diligence and preparing their bids. Looking forward, the bids will be evaluated by the Privatization Steering Committee and DAB in spring 2013. The verification of the final balance sheet will be undertaken by the ministry of finance on the basis of a handover balance sheet prepared by an appointed firm of auditors.

As a result of the settlement process, non-cash recoveries have been made in the amount of US$1.4 million. While these recoveries are not yet booked subject to finalization of agreements, the effect is that the obligation of the government in the NKB’s claim against the receivership is reduced.

Update of the institutional process

As of September 15, 2012, there were three cases before the Special Tribunal for amounts totaling $422 million and there were six cases before the Financial Disputes Resolution Commission(FDRC) for amounts totaling $164 million.

Regarding the Special Tribunal, 19 new cases have been taken up by the Special Tribunal (as decided at the October 30 meeting convened by President Karzai, indictments had been made earlier). The Special Tribunalbegan deliberations on all 22cases in the Kabul Bank matter at public hearings at the Kabul Court of Appeals. The three judges of the Tribunal heard opening statements from November 14-19, 2012 and hearings of all indicted persons continued for the two weeks that followed. Hearings were open to the public, and reported on widely by domestic and international media. The three judges of the Special Tribunal are now reviewing their findings, seeking further information and continuing their deliberations. Once they have reached their conclusions, they will be communicated openly to the public. In all, the Tribunal heard the cases of all indicted persons. Criminal convictions of any of the beneficiaries of crimes committed at Kabul Bank are likely to facilitate more efficient domestic and international asset recovery and a report of these convictions will supplement requests for mutual legal assistance currently being considered in foreign jurisdictions.

Regarding the FDRC, between September 15 and December 21, 2012, 6 new cases have been referred to it and 3 judgments have been made by the FDRC which ruled in favor of the receivership. The judgments made amount to $20.5 million in total. FDRC currently sub-judicing on 3 cases amounting to $117.3million.

As reported on September 26, in order to assist our investigations and our efforts to recover assets outside of Afghanistan, we have issued mutual legal assistance (MLA) requests to the United Arab Emirates, the United Kingdom, Switzerland, India and France. Of these countries, France has responded back seeking more information on the bank accounts and assets which is being provided. Discussions with iudicial counterparts in the United Arab Emirates and the United Kingdom have also progressed to this end. The Attorney General’s Office (AGO) will seek meetings with judicial counterparts in some jurisdictions to move ahead with this mutual legal assistance.

Independent Public Inquiry

The Independent Joint Anti-Corruption Monitoring and Evaluation Committee (IMEC) undertook an independent in depth public inquiry into the Kabul Bank crisis. Approximately 23 entities cooperated in the inquiry and the IMEC felt that they were able to conduct their inquiry independently. The report of this inquiry was published on November 28,2012 and is available at The report’s conclusions lead to a comprehensive list of recommendations in the areas of governance, regulatory supervision and enforcement, criminal investigation, judicial proceedings, recoveries, the sale of New Kabul Bank, and monitoring of the implementation of its recommendations. We are currently reviewing these recommendations, along with our technical assistance partners in the donor community, with a view to implementation.

Conclusion

We continue to work for the resolution of Kabul Bank crisis. Despite limited experience and capacity to deal with an event of this scope, Afghanistan has made significant progress in tracing, identifying and recovering assets owed. President Karzai’s April 2012 decree and the meeting he convened in late-October demonstrate the commitment of the Government at the highest level to collect what is owed to the Government and People of Afghanistan, and to punish those found guilty of crimes in relation to Kabul Bank.We remain committed to pursuing the resolution of civil legal issues, working to trace assets abroad that may be seized as the proceeds of crime, and awaiting the judgments in the criminal cases. We will continue our work with our international parties to resolve Kabul Bank and maximize asset recoveries in order to curb economic crime, safeguard the financial sector, minimize the cost to the Afghan government and people, and foster the rule of law.