Malaysian central bank called to act against 1MDB officials

Bank Negara Malaysia says it will continue to work with international agencies over alleged fraud

bank-negara-malaysia-pic-2
Malaysian authorities have not yet brought criminal charges against anyone over the affair

Malaysia’s opposition party has called for the country’s central bank to take legal action against senior figures, including the prime minister, implicated in the multi-billion dollar 1MDB scandal.

A letter from the head of legal affairs at Bank Negara Malaysia states the central bank will work with international enforcement and regulatory agencies over the affair. The letter, addressed to opposition party leader Wan Azizah Wan Ismail, came in response to opposition lawmakers’ questions about BNM’s handling of 1MDB, which is a government-owned development fund.

The memorandum says the BNM’s proceedings regarding a breach of Malaysia’s financial services act had been concluded when 1MDB paid fines to the central bank. It adds that over the past two years, BNM fined 1MDB and associated entities a total of MYR115.8 million ($27.4 million).

But the memorandum also says BNM has provided, and will continue to provide, full co-operation to any relevant enforcement agencies in investigations conducted under existing legislation and international protocols. It acknowledges the point made in a communication from Wan Azizah that the US government has filed a case against 1MDB.

1MDB has been accused by a series of major financial regulators of misusing several billion US dollars. The chairman of the fund’s board in the period in which the alleged malpractice took place was Malaysia’s prime minister, Najib Razak. He has remained in office since the scandal broke, and strongly denies any wrongdoing.

The US Department of Justice’s lawsuit against 1MDB alleges it carried out major fraud, and claims damages and assets worth more than $1.6 billion. Police investigators working with Singapore’s central bank have arrested several people in connection with the case, and various other countries have closed or fined financial institutions for their dealings with 1MDB.

Wan Azizah told a press conference on September 27 that BNM only used clauses of Malaysia’s financial services act relating to the corporate responsibility of 1MDB. The central bank should now use clauses enabling it to take action against 1MDB’s senior officials at the time of the alleged malpractice, she argued. To date, Malaysian authorities have not brought criminal charges against anyone over the affair.

If BNM had already imposed MYR115.8 million in fines on 1MDB, it means a lot of violations occurred in 1MDB’s affairs
Wan Azizah Wan Ismail, opposition party

Another opposition politician, Liew Chin Tong, told local media lawmakers had requested a formal meeting about 1MDB with the current central bank governor, Muhammad Ibrahim.

“If BNM had already imposed MYR115.8 million in fines on 1MDB, it means a lot of violations occurred in 1MDB’s affairs,” Wan Azizah told local media. She added: “These transactions and actions occurred under orders from someone, as 1MDB is not an entity that acts on its own.”

Wan Azizah also says MYR53.7 million of the fine has been paid by a subsidiary of 1MDB. She wants the central bank to state whether the remainder, MYR62.1 million, has been paid.

Following the leaking of documents to international media outlets alleging malpractice by 1MDB, BNM set up an official inquiry into the fund in 2015. This was staffed by employees of the central bank, along with personnel from Malaysia’s police, anti-corruption authority and attorney-general’s office.

BNM issued a statement in October 2015 saying it had recommended a criminal prosecution of 1MDB under foreign exchange legislation, but this had been rejected by Malaysia’s attorney general. BNM was led by governor Zeti Akhtar Aziz while the investigation into 1MDB was active. She retired as governor in 2016, after 16 years in the post, and was replaced by Ibrahim.

The BNM has only rarely commented on the 1MDB affair since October 2015, and has usually restricted its remarks to references to the fact that it had concluded its inquiry into the fund.

This story originally appeared on Risk.net’s sister website, CentralBanking.com.

  • LinkedIn  
  • Save this article
  • Print this page  

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: