Compliance
Goldman Sachs Settles 1MDB Case, To Pay $3.9 Billion
The development is a major case in the saga of the 1MDB scandal, one of the biggest of its kind in history, embroiling jurisdictions such as Singapore, the US, Switzerland and Luxembourg.
Goldman Sachs
has agreed in principle to settle all criminal and regulatory
proceedings with Malaysia’s government stemming from the US
firm’s dealings with the scandal-warped 1MDB fund.
The firm will pay $2.5 billion to Malaysia and guarantee that the
administration receives at least $1.4 billion from assets linked
to 1MDB seized by authorities around the world.
The settlement will, the Wall Street-listed firm hopes, draw a
red line under an affair that has embroiled Goldman Sachs for
several years. The 1MDB fund, created by the Malaysian
authorities, which has been allegedly used to siphon money off
for personal gain, with money laundered around the world, has
been one of the biggest money laundering scandals in
history.
In its July 24 statement, the Malaysian government agreed to
withdraw the pending criminal charges and agreed that no further
charges would be brought against the Goldman Sachs, its
subsidiaries, or any of their directors, officers and employees
(excluding former employees Tim Leissner and Roger Ng) related to
1MDB.
“In light of this development, Goldman Sachs expects to
materially increase its provisions for litigation and regulatory
proceedings for the second quarter of 2020, which will be
reflected in its financial statements to be filed with its
Quarterly Report on Form 10-Q for the period ended June 30,
2020,” the firm said.
“The agreement in principle does not resolve the other pending
governmental and regulatory investigations involving the firm
relating to 1MDB,” it added.
In April, US
authorities announced that they had returned $300 million to
Malaysia which prosecutors say was stolen in the 1MDB case. The
returned money came from assets forfeited in 2019 by fugitive
financier Jho Low, in a Los Angeles federal settlement. The
settlement covered assets which included a Manhattan penthouse, a
Beverly Hills mansion, a Beverly Hills boutique hotel, a luxury
jet, and paintings by Vincent Van Gogh and Claude Monet.
The money was siphoned off and laundered through financial
institutions in several jurisdictions, including the US,
Switzerland, Singapore and Luxembourg. The scandal played a part
in defeating former Malaysia prime minister Najib Razak in 2018.
In 2016, Singapore’s financial regulator kicked out banks for
serious AML lapses (Falcon Private Bank, BSI). The affair has
prompted renewed soul searching about the extent of illicit
financial flows around the world. In a bizarre twist melding
fiction and fact, money from 1MDB was used to finance the hit
film about a financial crook - The Wolf of Wall
Street.
The Malaysian government had charged Goldman Sachs and 17
and former directors of its units for allegedly misleading
investors over bond sales totaling $6.5 billion which the US bank
helped raise for sovereign wealth funds.