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Goldman Sachs Criminally Charged By Malaysia

Tom Burroughes

17 December 2018

, in 2012 and 2013.

The US investment bank and four individuals - two of them former Goldman employees - are accused of "grave violations" of Malaysia's securities laws, Attorney General Tommy Thomas was quoted saying today by media outlets.

The firm has become embroiled in a scandal in which it is claimed that politicians and others used 1MDB to siphon off billions of dollars. In a bizarre twist, the movie The Wolf of Wall Street, a film about a notorious crook, was financed with 1MDB cash. 

Thomas accused Goldmans and four individuals of misleading investors about the bond sales and fraudulently diverting $2.7 billion of the proceeds. “Having held themselves out as the pre-eminent global advisor/arranger for bonds, the highest standards are expected of Goldman Sachs," Malaysia's attorney general was quoted saying (source: CNN). "They have fallen far short of any standard. In consequence, they have to be held accountable."

The firm has denied the claims. "We believe these charges are misdirected and we will vigorously defend them and look forward to the opportunity to present our case," a Goldman Sachs spokesperson was quoted as saying. "The firm continues to cooperate with all authorities investigating these matters."

As reported a few days ago, Goldman Sachs has also been accused by an Abu Dhabi sovereign wealth fund of being a central player in the scandal. International Petroleum Investment Company, which for a period had been an investment partner of 1Malaysia Development Bhd – 1MDB, named the US investment bank in a lawsuit filed in a state court in New York. The case notes, which also named several other individuals associated with 1MDB, did not specify the amount of damages that IPIC was seeking, the Wall Street Journal reported at the time. 

Money laundering concerns
The affair underscores how anti-money laundering controls have become an increasingly urgent wealth management and financial services issue. Authorities in Singapore, Switzerland and the US, among others, have investigated cases linked to the 1MDB affair. Singapore, for example, has expelled banks and imposed fines. In Europe, money laundering scandals in Denmark, the Baltic states and other jurisdictions have led to major investigations.

Malaysian prosecutors also filed criminal charges against Jho Low, a Malaysian financier who allegedly played a key role in laundering billions of dollars from 1MDB. Authorities in the country have managed to recover a $250 million yacht Low had bought in 2014, allegedly using 1MDB money to finance this. Low, who claims he is innocent, remains at large.

Former Malaysian Prime Minister Najib Razak has been charged with corruption and denies the offences. He was arrested after his government lost power in elections this May.