By William Fisher
Wherever there’s war, there’s waste. And theft. And corruption.
Think back to 2003-2004, when the Americans were still trying to track the US tax dollars that had “gone missing” in the Iraq War. In one Congressional hearing alone, lawmakers heard testimony that billions of Iraqi dollars – held in trust by the U.S. Government – still could not be accounted for.
Both Republicans and Democrats at that hearing appeared taken aback by the volume of cash sent to Iraq: nearly $12 billion over the course of the U.S. occupation from March 2003 to June 2004.
Rep. Christopher Shays, then the Connecticut Republican chairman of the committee, criticized Pentagon witnesses for their handling of the money.
"It's very clear that … we didn't have systems in place to account" for the
funds, he said.
Jack Behrman, professor emeritus at the University of North Carolina Business School, told this correspondent, "The misuse, abuse, and misdirection of funds to Iraq are a perfect example of the U.S. historical approach to crises abroad and development aid -- throw money at the problem quickly to demonstrate concern and activity. But, the government has apparently never heard or has not heeded the admonition of Aristotle that ‘It is easy to give money away, but it is exceedingly difficult to give it away wisely’.”
A report prepared by California Democratic Congressman Waxman found “an appalling level of incompetence, mismanagement, waste, fraud, and greed.” Waxman’s report cited numerous examples of “wasteful and potentially corrupt spending.”
So why should we be surprised to learn that things are no different in Afghanistan – only perhaps worse. Were we supposed to have learned any lessons from the Iraq fiasco?
Apparently not, because a new report from the Special Inspector General for Afghanistan Reconstruction (SIGAR) is igniting yet more suspicions that U.S. taxpayer money for projects in Afghanistan may have been – and is currently being – diverted to extremists killing dedicated to killing American troops, and that an estimated $10 million a day is being smuggled out of the country by senior government officials.
The newest SIGAR report to Congress charges that the United States still has only "limited visibility" of what happens to billions of dollars, "leaving them vulnerable to fraud or diversion to insurgents."
The Inspector General says that more than $70 billion has been spent on security and development projects since 2002 in Afghanistan, but lack of oversight, foot-dragging by the Afghanistan government and failure to take simple steps like recording cash serial numbers means some of the money is hard to track.
One problem, the IG report says, is the use of hawalas -- traditional and informal financial organizations -- instead of banks to transfer funds. Some hawalas are registered with the government, but others are not and refuse to divulge details of their business.
The report cites an example of how a U.S. contractor tried to transfer
$2.8 million inside Afghanistan that never arrived. "Despite investigations by National Solidarity Program personnel and interventions on the part of the Afghan Attorney General's office, this hawala continues to retain the majority of these funds and refuses to deliver them to the intended communities," the report says.
Another problem is that large amounts of money -- as much as $10 million a day -- are smuggled out of the country. The report says that despite controls at Kabul airport, government officials and other powerful people in Afghanistan can avoid currency checks when they leave.
"Passengers designated by the Afghan government as VIPs bypass the main security and customs screenings used by all other passengers and instead use a separate facility to enter the secured area of the airport," the report says.
"While VIPs are required to declare their currency, Afghan officials reportedly have no plans to scan their cash through electronic currency counters." U.S. officials were denied access to that part of the airport to see how VIP passengers were screened.
SIGAR found that U.S. agencies have limited visibility over U.S. cash that enters the Afghan economy -- leaving it vulnerable to fraud and diversion to the insurgency. SIGAR also found that poor cooperation by the Afghan government has impeded U.S. efforts to help develop the Afghan financial sector.
"The United States has poured billions of aid dollars into a country plagued by corruption, insurgency and the narcotics trade. It is essential that we use all available tools to ensure that U.S. dollars are protected from fraud and diversion to the insurgency. We must also ensure that the Afghan government is a full partner in efforts to set a fledgling financial sector on sound footing," said Herbert Richardson, acting Special Inspector General for Afghanistan Reconstruction.
"SIGAR auditors found that U.S. agencies have not done all they can to safeguard U.S. funds, and the Afghan government has not provided the cooperation needed to build a strong, secure financial system. SIGAR's recommendations, if implemented, would address these shortcomings and strengthen efforts to protect American taxpayers," the report says.
The agency recommended that the U.S. Ambassador to Afghanistan "improve interagency coordination on financial sector development programs" and also recommended that the secretaries of State and Defense "strengthen oversight over the flow of U.S. funds through the Afghan economy," according to the report.
Since 2002, Congress has appropriated more than $70 billion to implement security and development assistance projects in Afghanistan, with some of those funds converted into cash that flows through the Afghan economy.
The United States is implementing programs to increase the capacity of Afghanistan's central bank to regulate the nation's 17 commercial banks and to strengthen U.S. and Afghan law-enforcement monitoring of controls over the flows of U.S. aid through the Afghan economy.
SIGAR's audit evaluates U.S. efforts to improve the capacity of the Afghan government to regulate the financial sector and assesses controls that U.S. agencies use to track U.S. funds as they flow through the Afghan economy.
The New York Times reports that agents from the inspector general's office found that the living and working quarters of American occupation officials were awash in shrink-wrapped stacks of $100 bills, colloquially known as bricks.
One official, The Times reported, kept $2 million in a bathroom safe, another more than half a million dollars in an unlocked footlocker. One contractor received more than $100,000 to completely refurbish an Olympic pool but only polished the pumps; even so, local American officials certified the work as completed. More than 2,000 contracts ranging in value from a few thousand dollars to more than half a million, some $88 million in all, were examined by agents from the inspector general's office.
The report says that in some cases the agents found clear indications of potential fraud and that investigations into those cases are continuing.
Some of those cases are expected to intersect with the investigations of four
Americans who have been arrested on bribery, theft, weapons and conspiracy charges for what federal prosecutors say was a scheme to steer reconstruction projects to an American contractor working out of the southern city of Hilla, which served as a kind of provincial capital for a vast swath of Iraq under the Coalition Provisional Authority.
But much of the material in the latest audit is new, and the portrait it paints
of abandoned rebuilding projects, nonexistent paperwork and cash routinely taken from the main vault in Hilla without even a log to keep track of the
transactions is likely to raise major new questions about how the provisional
authority did its business and accounted for huge expenditures of Iraqi and
Although U.S. agencies have taken steps to strengthen their oversight of U.S. funds, the United States still has limited visibility over how these funds flow through the Afghan economy, leaving them vulnerable to fraud or diversion to insurgents. Among the vulnerabilities identified by SIGAR auditors:
· U.S. agencies do not record the serial numbers of cash disbursed to contractors and other recipients of U.S. funds;
· Afghan commercial banks do not record the serial numbers of Electronic Funds Transfer payments by U.S. agencies to contractors and other recipients when they are converted to cash;
· U.S. contracting regulations do not prohibit prime contractors from using unlicensed hawalas to pay subcontractors or require them to use EFT-capable banks to make payments. As a result, the United States is unable to record information n these funds when they enter Afghanistan's economy, and the Afghan and U.S. governments are unable to track these funds as they move from person to person, information that could be important for law enforcement purposes.
· Limited Afghan cooperation has negatively impacted programs to strengthen Afghanistan's financial sector and address money laundering and terrorist financing. For example, the Afghan Attorney General's office has not cooperated fully in prosecuting individuals suspected by the U.S. Treasury Department of having committed financial crimes, limiting the effectiveness of the Financial Transactions and Records Analysis Center of Afghanistan (FinTRACA). Of 21 leads forwarded by FinTRACA to the Afghan government, only four were pursued to prosecution by the Afghan Attorney General's office.
· In addition, Treasury officials report that Afghan President Hamid Karzai has barred U.S. government advisors from the Afghan central bank, a key institution that they described as having a "hostile"environment.
· Limited Afghan cooperation has hindered the U.S. Department of Homeland Security's efforts to strengthen controls over currency flows at Kabul International Airport. As a result of concerns over lack of controls over the significant flow of currency through the airport, DHS developed the Bulk Cash Flow Action Plan with assistance from Afghan ministries that conduct operations at the airport. DHS's responsibilities under the Bulk Cash Flow Action Plan include supporting Afghan government efforts to strengthen controls over passengers leaving Afghanistan with bulk cash. However, DHS reports that installation of two custom-built bulk currency counters for the airport's customs areas was delayed by seven months because of disagreements over where to place the machines.
· Also, as of SIGAR's April 2011 visit to the airport, Afghan customs officials were using the machines to count declared cash - but not to record serial numbers or report financial data to FinTRACA. Other impediments to DHS efforts include the Afghan government's practice of allowing VIPs to bypass the main security and customs screenings used by all other passengers; these VIPs are required to declare their currency, but Afghan officials reportedly have no plans to scan this cash through currency counters. Additionally, DHS officials are barred from the facility that VIPs currently use.
Yes, you read that correctly. US officials are barred from that particular room at the back of the Kabul airport so that Afghan VIPS will suffer no embarrassments or anxieties – dare I say pangs of conscience? – as they secret your tax dollars in their luggage or on their person, knowing that as government officials there will be no search at their destination either.
War usually means we have to accept some of this despicable behavior. It seems to go with the territory. But given that these funds are intended to improve the lot of the Afghan people, not US troops, is it not time to say ‘enough is enough?’
The US lopped off a good chunk of American aid to Pakistan because the Pakistanis were not with the program. Failing all past efforts to find an honest partner to work with in Afghanistan, hasn’t the time come to do the same?