US$7 Billion 1MDB Funds Channelled Through Global Financial System

Around $7 billion originating from Malaysian state investment fund 1Malaysia Development Bhd. and its former unit flowed through the global financial system between 2009 and 2015, the Swiss Attorney-General said, underscoring the scale of the financial scandal that has engulfed the fund. Swiss authorities are investigating how much of the money that flowed through the Swiss financial system may have been misappropriated, Michael Lauber said Tuesday.

Investigations into 1MDB gained momentum after former Prime Minister Najib Razak, who set up 1MDB in 2009, lost a historic election on May 9 to his former mentor, Mahathir Mohamad. Less than two weeks later, Mr Mahathir assembled a task force to investigate possible criminal conduct linked to the 1MDB scandal and identify and seize any assets believed to have been purchased with stolen funds. Switzerland and other countries have also launched investigations into 1MDB. Mr Lauber was in Malaysia to discuss coordination of the investigations with Malaysian authorities. Mr Najib last week pleaded not guilty to four charges, including three of criminal breach of trust. Mr Najib and the state fund have repeatedly denied any wrongdoing. A Malaysian investigation conducted while Mr Najib was in power cleared him of wrongdoing.

Switzerland has frozen about $400 million of funds in its jurisdiction as part of its money-laundering investigation into 1MDB and SRC International Sdn Bhd., Mr Lauber added. SRC International was established in 2011 as 1MDB’s vehicle for overseas energy investments. It was placed under the Finance Ministry’s control in 2012. Mr Lauber said six people and two banks are under investigation by Swiss authorities over alleged dealings with 1MDB. Swiss prosecutors in November launched criminal proceedings against two officials who weren’t named at PetroSaudi International Ltd. related to alleged dealings with 1MDB. Attorneys for PetroSaudi said in an earlier statement that the company is aware of the investigation and that the company isn’t the subject of the probe. Mr Lauber said the others include two former officials from the United Arab Emirates and two former officials of 1MDB. Mr Lauber didn’t name the officials. Mr Najib isn’t one of the officials being investigated, Mr Lauber said.

Credit: Yantoultra Ngui for The Wall Street Journal, 10 July 2018.