Behind the 1MDB scandal – Part 5

Behind the 1MDB scandal: How banks missed clues and bowed to pressure

The 1MDB fund, meanwhile, was running into financial trouble as money flowed out and no major revenue-generating investments were there to replace it.

In 2012, Goldman Sachs sold $US3.5 billion in 1MDB bonds in two offerings, which were cleared by committees that included some of the firm’s most senior officials, people involved in the transactions said. Goldman earned hundreds of millions of dollars in fees on the bonds, which carried a safe, sovereign-risk profile and were bought by foreign institutional investors.

Some of the money was used for the stated purposes — to buy power plants — but almost half was sent into offshore shell companies overseen by Mr Low and his associates, according to the Justice Department.

Mr Low turned to contacts in Abu Dhabi in the United Arab Emirates to help raise money. He knew Khadem Al Qubaisi, then managing director of International Petroleum Investment Co., or IPIC, an $US80 billion Abu Dhabi sovereign-wealth fund.

IPIC announced it would participate with 1MDB to develop power plants. The Malaysian fund told its auditors and bankers it was sending $US1.4 billion to IPIC as a “refundable deposit.”

The money never arrived. The Justice Department complaint says it was diverted to a company with a name similar to an IPIC subsidiary, which was registered in the British Virgin Islands and controlled by Mr Al Qubaisi. Then more than $US1 billion went into a Standard Chartered account in Singapore controlled by an associate of Mr Low, the complaint says, and Standard Chartered and Citigroup acted as correspondent banks. Money eventually was sent to other participants in the alleged fraud, the complaint says.

In July, the Monetary Authority of Singapore, the nation’s central bank, found Standard Chartered and two other non-US banks had failed to report suspicious transactions related to 1MDB and would face “firm regulatory actions.”

A Standard Chartered spokesman said the bank was co-operating with “all relevant investigations” and has enhanced anti-money-laundering controls. Citigroup declined to comment.

Mr Al Qubaisi wound up with more than $US470 million of the money, $US100 million of which was used to buy three luxury properties in New York and Los Angeles, the complaint says.

He also helped funnel $US238 million of 1MDB money to Riza Aziz, the prime minister’s stepson, the complaint adds. Mr Aziz used the money to buy real estate and fund his Hollywood film company, Red Granite Pictures, which made “The Wolf of Wall Street,” according to the complaint. Mr Aziz has denied wrongdoing.

Behind the 1MDB scandal: How banks missed clues and bowed to pressure
Tom Wright, Bradley Hope
Wall Street Journal
September 6, 2016 – The Australian


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All that is necessary
for the triumph of evil
is for good men
to do nothing.

- Edmund Burke
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fears their government,
there is TYRANNY;
when the government
fears the people,
there is LIBERTY.

- Thomas Jefferson
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