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US authorities have charged a Malaysian fugitive financier and two former Goldman Sachs bankers with a money laundering and bribery scheme that allegedly stole billions from Malaysian investment fund 1MDB. The corruption scandal involving the fund had already upset Malaysian politics. The long ruling coalition was ousted in the May elections and the then prime minister, Najib Razak, who had created the fund, is now facing criminal charges in Malaysia. Last year, the country reached its worst ever score in Transparency International's highly influential Corruption Perception Index. Here is an overview of the fund and the evolution of the scandal:
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1MDB WHAT?
The fund, 1Malaysia Development Berhad, was created in 2009 to promote economic development. Najib chaired his advisory council and, as finance minister, had a veto over his activities. Between 2009 and 2014, Najib's top executives and associates stole $ 4.5 billion from the fund, laundering it in the United States, Singapore, Switzerland and other countries, according to the US Department of Justice. US Attorney General Jeff Sessions has called the scandal "kleptocracy at its worst". About 700 million dollars have landed in Najib's bank account, though it denies any wrongdoing. 1MDB is now in debt under a huge debt.
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POLITICAL EARTHQUAKE
In 2015, Najib fired his attorney general and a deputy prime minister for demanding answers regarding 1MDB. A parliamentary inquiry revealed numerous irregularities but did not have the mandate to prosecute. Outraged by the scandal, former leader Mahathir Mohamad stepped out of his political retreat and the opposition united behind him in the national elections. Aged 93, he is now prime minister and has reopened the 1MDB fund investigation. The police also seized hundreds of luxury handbags, jewelery and money – worth more than $ 266 million – during searches of Najib's family apartments. Najib and his wife have been charged with several counts of bribery and money laundering. They both pleaded not guilty and will be tried next year. Najib accuses the new government of seeking political revenge and has vowed to clarify his name.
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OPERATIVE MODE
The US Department of Justice alleges that the conspiracy includes four phases that all involve the use of layers of foreign bank accounts and front companies to launder money. It says that initially, a $ 1 billion investment had been diverted and that in subsequent phases the money had been siphoned off of 1MDB bond sales. In some cases, the names of the fictitious companies operating the bank accounts imitated the names of the legitimate beneficiaries. When banks questioned large money transfers, the conspirators used fake commercial documents to address their concerns, the ministry said. The United States said that the money they were seeking to recover had been played in Las Vegas, used to buy hotels, apartments, a luxury yacht, a jet, diamond jewelry and works of art, as well as to finance Hollywood films like "Wolf of Wall Street" and "Dumb and Dumber To."
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KEY PLAYER
US prosecutors allege that Malaysia's Low Taek Jho, commonly known as Jho Low, was a central figure who orchestrated the looting of the 1MDB. A friend of Najib's son-in-law, Riza Aziz, Low had no official role at 1MDB but had considerable influence over his transactions and was often in contact with Najib, according to the Justice Department. "It looks like we may have hit a gold mine," he said in an email to family members after organizing an agreement on 1MDB, which would later become a vehicle for money laundering. Singapore has been fined eight banks for failing to implement appropriate anti money laundering measures against 1MDB and has sentenced several bankers to jail time. He seized 240 million dollars ($ 180 million) in property and money, about half of which belonged to Low and his immediate family. In collaboration with the FBI, Indonesian authorities seized the $ 250 million low-end luxury yacht Equanimity off Bali in February. The Malaysian government is auctioning it. Low has declared illegal the surrender of the yacht to Malaysia by statements of his US lawyers, but he has not claimed ownership of the vessel in the Malaysian court.
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WHAT NEXT FOR 1MDB?
The Najib administration in February announced that the 1MDB would be closed once its debts cleared. The fund exists at the moment but has been declared insolvent. The new government said it would honor 1MDB's debt obligations. But he recently challenged a settlement reached last year by a London court for the fund to pay $ 5.8 billion to the Abu Dhabi International Petroleum Investment Company over five years. Malaysia is also seeking to recover $ 1.46 billion that it has already paid. Mahathir said the government would impose new taxes and could sell assets to help pay off national debts. He also canceled some large infrastructure projects to cut costs and the government said it could take up to three years to solve its budget problems.
