Magazine article Washington Report on Middle East Affairs

Malaysia's Prime Minister: Challenges Abroad, Consolidation at Home

Magazine article Washington Report on Middle East Affairs

Malaysia's Prime Minister: Challenges Abroad, Consolidation at Home

Article excerpt

THE SCANDAL OF sovereign wealth fund 1 Malaysia Development Berhad (1MDB), and questions over how deeply involved in it Malaysian Prime Minister Najib Razak may be, has ground on for nearly two years, without resolution (see October 2015 Washington Report, p. 32). In the past year, Najib has fended offpressure to resign and reinforced his position, but he has faced new challenges internationally.

Investigations into 1MDB-linked transactions were launched in Switzerland, the U.S., Luxembourg, United Arab Emirates and Singapore. The Swiss investigation was launched in August 2015 and at least four suspects have been indicted, on allegations that 1MDB had broken Switzerland's anti-embezzlement laws when it routed a fraudulent deal made with UAE officials through Swiss banks. Luxembourg and Singapore responded to Swiss requests for assistance. In May, Hong Kong's anti-corruption agency froze the bank accounts of unnamed individuals associated with 1MDB.

Also in May, the Monetary Authority of Singapore (MAS) shut down operations in the island state of the Swiss private bank BSI for serious breaches of Singapore's anti-money laundering rules-the first time in 32 years it had taken such a step. MAS made no statement pinpointing dealings with 1MDB, but the Swiss Market Supervisory Authority did. The Swiss authorities seized 95 million Swiss francs of BSI's profits at the same time as MAS acted.

On July 18 it was reported that Singapore's central bank was investigating a number of banks, local and international, for possible breaches of anti-money laundering rules in connection with 1MDB. Days later, the U.S. government seized over $1 billion of assets that the Department of Justice (DoJ) believed to have been purchased with money stolen from 1MDB and moved around the world through shell companies. Much more money was syphoned off: the DoJ named people who it believed had conspired to divert billions from the company in what it described as "an international conspiracy to launder money misappropriated from 1MDB."

One of those people was Riza Aziz, the eldest son of Najib's wife from a previous marriage. Riza had worked as a banker in London before moving to the U.S. and co-founding Red Granite Pictures, which funded the making of the film "The Wolf of Wall Street"-a film, incidentally, based on the memoirs of a former stockbroker whose firm's involvement in corruption and fraud led to his ruin. He bought expensive homes in London and New York, using $94.3 million that the DoJ said he claimed he had received as a "gift." The DoJ charged that 1MDB money was used to found Red Granite Pictures.

Others named by the DoJ included Low Taek Jho, a businessman close to Najib who the DoJ claimed had acquired a large stake in EMI and bought luxury homes with 1MDB money; Khadem al-Qubaisi, a UAE businessman who headed two companies involved in suspect bond deals with 1MDB in 2012, and who bought properties in New York and Beverly Hills with 1MDB money; and Mohammed Ahmed Badawy Al-Husseiny, a former chief executive of Aabar Investments PJS when it was headed by al-Qubaisi, who had bought a house in Belgravia, central London.

In addition, the DoJ referred to an unnamed high official in the Malaysian government "who also held a position of authority with 1MDB," who it believed to be the owner of an AmBank account into which $681 million was paid in March 2013. It was widely speculated that this unnamed individual was Najib himself, but there was no official confirmation that this was so, despite the fact that the transfer of the sum of $681 million into a personal bank account of Najib had been in the news earlier. …

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