By Holly Reeves
Criminal proceedings are finally being filed in the 1Malaysia Development Berhad (1MDB) case. Swiss financial regulators have opened a case against the country’s BSI bank over links to corruption allegations against the fund.
“The offences of money laundering and bribery of foreign public officials currently under investigation in the context of the 1MDB case could have been prevented [by BSI]”, said Switzerland’s Office of the Attorney General.
The link is the 34-year-old Malaysian dealmaker, Jho Low. His company, Good Star, is alleged to have received $700 million from 1MDB in late 2009, and $330m in May 2011.
So far, 1MDB accusations have been cloak and dagger. Denials and cover-ups. But this allegation seems to be well-evidenced – and by people in high places.
Najib Razak reportedly confirmed to parliament that Good Star was owned by PetroSaudi at the time of the fund transfers thanks to a joint venture between the company and 1MDB between 2009 and 2012.
Yet according to a Malaysian central bank letter dated March 23, deputy governor Nor Shamsiah Yunus advised Hasan Arifin, chairman of the Malaysian parliament’s public accounts committee, that money from 1MDB was not going to a legitimate beneficiary, PetroSaudi. Instead, it was being paid to Low’s company.
At this stage, neither Swiss nor Singaporean authorities have named Mr Low in the case. He has described his role in relation to the Malaysian fund as informal consulting work that did not break any law, and he denies any wrongdoing.
However, in the wake of yet another wave of damning allegations, the Swiss are taking the toughest punitive action yet announced in the affair. BSI will be taken over by Zurich-based private banking group EFG International on the condition that it is integrated “and thereafter dissolved” within 12 months. It also ordered the seizure of US $95 million of BSI’s “illegally generated” profits.
Meanwhile the same merchant bank is either leaving or being unceremoniously ejected, from their foothold in Southeast Asia. Singaporean authorities served BSI notice of intention to withdraw its status as a merchant bank for serious breaches of anti-money laundering requirements, poor management oversight of the bank’s operations, and gross misconduct by some of the bank’s staff.
It also referred the names of six members of BSI Bank’s senior management and staff to the Public Prosecutor evaluate whether they have committed criminal offences. The Monetary Authority of Singapore (MAS), Singapore’s central bank, found considerable evidence of gross dereliction of duty and failure to discharge oversight responsibilities on the part of BSI Bank’s senior management.
MAS said, “Their ineffective governance led to a poor risk culture, which prioritised questionable customer demands ahead of compliance with anti-money laundering regulations and the bank’s own internal controls.”
So now we have high-level evidence of inappropriate money flows; criminal charges; and a bank forcibly dissolved. At the same time, the Wall Street Journal, which unveiled this scandal started, is back on the attack. Their latest update on 1MBD aims to stir the blood of the average Malaysian. The target this time is the Public Accounts Committee (PAC), and their investigations into what happened.
“Evidence possibly central to the probes was placed off limits or ignored,” the influential news site says. “Potentially crucial clues weren’t scrutinized. And at least one key figure, Malaysian Prime Minister Najib Razak himself, wasn’t interviewed by investigators.”
Tony Pua, an opposition lawmaker who sits on the committee, highlighted inaccuracies in what the public knows. He said that during private presentations the auditor general “specifically confirmed that US $7 billion of 1MDB assets and transactions overseas cannot be verified or traced.” The committee, however, made no mention of this when it published its report in April, saying only that an unspecified amount of money was unaccounted for.
Najib’s spokesperson Datuk Seri Tengku Sariffuddin denied the claims, saying, “They rely only on anonymous sources and smears by Tun Mahathir and his new allies in the DAP.” Calling instead for the newspaper to be investigated for “taking sides.”
The easy way to settle this, and quell the rumours of dishonesty at the highest level, would be to publish the report. However its contents are currently protected under the Official Secrets Act, supposedly to prevent information leaks during the course of the Committee’s probe on the firm.
But even with that threat passed Dewan Rakyat Speaker Tan Sri Pandikar Amin Mulia has rejected a motion to publicly reveal its contents.
Stuck in the mire
And so Malaysia remains stuck. Transparency would create room to move forward; but those in power are concerned about what the direction would be if the truth were told. Investigations completed at home to clear the air have no credibility; yet investigations overseas have yet to put a big name into the ring of criminal proceedings.
Yet it seems the net is closing in. Charges against BSI. Charges against Yeo Jiawei, a former BSI wealth planner, in a Singapore court in last month. But this may just be small fry; the biggest victim of 1MDB is almost certainly Malaysia itself.