REPEATED ROBBERIES COULD PRODUCE BANKING CRISIS

C O N F I D E N T I A L SECTION 01 OF 02 KABUL 000246 SIPDIS SIPDIS DEPT FOR SCA/FO FOR DAS GASTRIGHT, SCA/A, SCA/RA, SCA/PB, S/CRS DEPT PASS AID/ANE DEPT PASS OPIC FOR MOSBACHER AND ZAHNISER TREASURY FOR LMCDONALD, ABAUKOL, AND JCIORCIANI NSC FOR HARRIMAN OSD FOR KIMMITT E.O. 12958: DECL: 01/23/2017 TAGS: EFIN ECON PGOV PINS KCRM AF SUBJECT: REPEATED ROBBERIES COULD PRODUCE BANKING CRISIS KABUL 00000246 001.2 OF 002 Classified By: AMB Ronald Neumann for reasons 1.4(b) & (d). 1.(C) SUMMARY: Following its loss of $3 million in a January 11 robbery of an armored van, Standard Chartered Bank (SCB), the only international bank operating in Afghanistan, has pressed senior GOA officials for a serious investigation of the case to restore bankers' confidence in the GOA's management of the economy. This is the seventh such robbery (of six separate banks) in as many months. The Standard Chartered General Manager implied that senior GOA officials may be behind the robberies. To leverage its argument, Standard Chartered is threatening to withdraw its operations and has already ceased its cash transfer operations (e.g.: to U.S. contractors at Bagram Air Base). Central Bank Governor Delawari is aware of the gravity of the situation. He has changed his cash transfer operating methodology and is offering armored van services protected by the Presidential Guard. Afghanistan will remain a cash-based economy until the draft negotiable instruments law (both in the early draft and comment phase) is enacted, the banking system and culture further develop, and consumers build confidence in the system. A Standard Chartered departure from Afghanistan would send a shockwave through the banking community and the economy. It would be serious blow to the government's public image and damage already shaky investor confidence in the government's ability to manage the economy. We will need to press the GOA to investigate these cases, apprehend those responsible, and prosecute and convict them. We also need to persuade Standard Chartered to stay the course in Afghanistan. END SUMMARY. 2.(C) On January 18, local Standard Chartered Bank GM Josephus Silvanus (PROTECT) briefed Deputy Econ Counselor on the broad daylight robbery of a cash movement en route from the Central Bank to the Standard Chartered Bank. The robbery took place at one of the busiest intersections of Kabul, in front of the UAE and Turkish Embassies, not far from the Ministry of Foreign Affairs. Silvanus said that two "NDS" (National Directorate of Security) vehicles blocked the road, unloaded a large number of armed men, (including one or two RPGs),who proceeded to remove $3 million from an armored vehicle. He said that the accompanying private security guards, outnumbered and outgunned, did not resist. Silvanus charged that the robbery last week was a "set up" and suggested that his cash movement had been "fingered" by someone in the Central Bank. 3.(C) Silvanus implied that he had confirmed information that a senior official or officials in the GOA are behind the bank robberies. He commented that senior MOI officials are peddling the units under their control as personal security companies to banks, and asserted that the robberies could be retribution for not hiring one of them. Within Kabul, there have been seven major cash delivery robberies of which he is aware in as many months. Silvanus stated that his company's security rules forbid him from hiring local security companies. He added that his security detail is being interrogated by GOA investigators as if they are the primary suspects in the case, which he does not believe. Silvanus also noted that one of the vehicles used in the heist was recovered by the police, and it contained an unused RPG. 4.(C) Silvanus advised that he has asked Central Bank Governor Delawari and Commerce Minister Farhang to pressure the government to investigate the case seriously and apprehend the culprit(s). He advised both that Standard Chartered, the only western bank in Afghanistan, is seriously considering withdrawing from the country. Both Delawari and Farhang called President Karzai to express their concerns, and Silvanus indicated that he understands that the investigation has been transferred from the police to the KABUL 00000246 002.2 OF 002 NDS. He said the Bankers Association is also pressing the government for action and has been working up the government chain, but has not yet seen President Karzai. Silvanus welcomed the suggestion that he add the ministers of finance and agriculture to his list of individuals to approach with the case. Both are very keen about private sector access to finance. 5.(C) There have been some immediate operational consequences - Silvanus serves both Halliburton/KBR and Dyncorp at Bagram Air Base. He has informed both that he can no longer provide cash deliveries to them because he cannot guarantee the security of cash shipments. 6.(C) Deputy ECON Counselor and Treasury Attache asked Central Bank Governor Delawari about his efforts to address the robbery situation. Delawari expressed dismay at the robbery and deep concern about the impact on the economy and the country's reputation, if Standard Chartered leaves. He called Karzai immediately after the robbery to express his grave concern about the situation and the need for a conclusive investigation. Delawari admitted that he is not conducting an internal investigation of the staff responsible for organizing cash shipments. 7.(C) Deputy ECON Counselor and Treasury Attache stressed the importance of restoring bankers' confidence in the cash delivery system, suggesting that an investigation might be one action that could help. Delawari responded that he wanted to look ahead, so he has changed communication procedures to make them "more secure." He also has offered the Central Bank's own armored vehicles, protected by the Presidential Guard, to make cash runs for banks for a nominal fee. He also asked if USAID could quickly provide 4-5 additional armored vehicles so he could expand his fleet. 8.(C) COMMENT: Until the GOA can enact the draft Negotiable Instruments law (both in the draft and comment phase), Afghanistan's domestic economy remains entirely based on cash transactions. Thus it is no surprise, that the robbery of a Standard Chartered cash transfer and SCB's threat to leave Afghanistan are sending shockwaves through Kabul's banking community. A Standard Chartered withdrawal would be a major vote of no confidence in the government's ability to provide security and to manage the economy. The boldness of this robbery, and the six that preceded it, suggest that the person or persons behind them believe they can operate with impunity. If the culprit is a major political figure, a successful investigation and prosecution could bolster confidence in the government and enhance its reputation. Since the success of our mission depends on the GOA's success, we need to persuade the GOA to show the courage to apprehend, prosecute, convict the person(s) committing the crimes and to persuade Standard Chartered to stay the course in Afghanistan. END COMMENT. NEUMANN