SINGAPORE (July 9): Two years ago, when the idea of his return as prime minister of Malaysia seemed all but impossible, Dr Mahathir Mohamad was criticising the way Singapore was handling the alleged embezzlement and money laundering of funds from 1Malaysia Development Bhd (1MDB). In an interview with the Financial Times in August 2016, Mahathir accused Singapore authorities of failing to take action against the key culprits. “It affects Singapore’s reputation as a financial centre,” he said.

Now, Singapore as well as other countries around the world might finally be able to do more about the epic financial scandal that started in Malaysia. On July 3, Najib Razak, the disgraced former Malaysian prime minister, was arrested. He appeared in court the next day and pleaded not guilty to charges of corruption and criminal breach of trust related to 1MDB funds. His trial has been set for next year, starting in February.

According to documents released by the US Department of Justice, the Malaysian Attorney- General and the Malaysian Anti-Corruption Commission, hundreds of millions of dollars purportedly from 1MDB funds ended up in Najib’s personal bank account. Over the last two months, as the prospect of his arrest grew more imminent, Najib has loudly repeated his claim that the funds that ended up in his bank account were not from 1MDB but from a generous Middle Eastern donor. He has also denied having any knowledge of illicit activity at 1MDB and insisted that the billions of dollars of cash and jewellery that Malaysian authorities seized from properties linked to him were donations and gifts.

Nevertheless, Malaysia has charged Najib with three counts of criminal breach of trust involving a total of RM42 million ($14.2 million) belonging to SRC International, a company that was a subsidiary of 1MDB before being placed directly under the Finance Ministry in 2012. This could well be just the first step in further action in Malaysia against Najib and other players in the 1MDB scandal, including Low Taek Jho, better known as Jho Low, the chubby Penang-born businessman who is widely said to have engineered most of the misappropriation.

One obvious question is what role Singapore will play in Malaysia’s prosecution of the 1MDB case. A substantial chunk of the 1MDB funds that were allegedly embezzled by Najib and his associates flowed through financial institutions here.

Indeed, even as Mahathir was denouncing Singapore’s efforts in going after the perpetrators behind the 1MDB scandal, the Monetary Authority of Singapore (MAS), Commercial Affairs Department and Attorney-General had commenced investigations into suspected money laundering through financial institutions based here. In February 2016, proceedings started with 11 charges against BSI Bank wealth planner Yeo Jiawei.

In the months that followed, MAS shut down BSI Bank Singapore and Falcon Private Bank Singapore and fined Standard Chartered Bank Singapore, Coutts & Co Singapore and six other banks some $30 million for breaches of anti-money laundering regulations. The courts convicted four bankers, including Yeo, and a remisier, on various charges, including forgery and witness tampering. The Singapore Police Force has also recently revealed that it had issued arrest warrants for Low and his associate Eric Tan Kim Loong two years ago. Could the Singapore authorities really have done more? And what prevented them from doing so?

Being neighbourly?

Mahathir is not the only Malaysian who feels that Singapore could have done more. “There’s a perception in Malaysia that Singapore has not done enough against the financial institutions involved and their directors,” says Derek Fernandez, a senior litigation lawyer. “Just charging one or two officers or traders in the bank does not send a serious enough message to these financial institutions that they must surely be aware that huge amounts of suspicious monies are being channelled through their system without proper identification and verification of source, or purpose and basis.”

Some lawyers in Malaysia have noted that laws are in place for Singapore to have theoretically gone after some of the players in the 1MDB scandal across the Causeway. C Vignesh Kumar of Vignesh Kumar & Associates points out that the Malaysian Mutual Legal Assistance in Criminal Matters Act 2002 allows for foreign investigators to request for assistance from the Malaysian Attorney-General’s Chambers, “to secure attendance of any person to give statements to them”.

He adds, “The relationship between Malaysia and Singapore in criminal matters is unique. This is because an arrest warrant issued by a Singaporean Court can be executed in Malaysia as though it was issued by a Malaysian Court. This is provided for by the Extradition Act 1992.”

Of course, the players behind the 1MDB scandal were no ordinary criminals. As the case clearly involved a sitting Malaysian prime minister, the authorities in Singapore might have felt the need to tread carefully for fear of straining ties with its closest neighbour.

“Yes, I believe previously, Singapore stopped short of going after the main players because they were high-ranking Malaysian officials, to avoid diplomatic issues,” says Malaysian lawyer Syahredzan Johan, partner at RamRais & Partner. “Now that there is a change of administration, I believe Singapore can cast its net wider.”

However, some lawyers in Singapore doubt that more could have been done about the 1MDB case here. “It would have been impossible for Singapore, or for that matter, the US or the Swiss authorities, to take any action against Najib or other allegedly high-ranking officials in the former administration,” says Andre Jumabhoy, a former prosecutor based in Singapore. “It is a fundamental principle of international law that one sovereign state does not adjudicate on the actions of another sovereign state. This state immunity extends to the leader of the state and renders him immune from all actions, whether civil or criminal, irrespective of whether or not they are done for the benefit of the state.”

In fact, Singapore’s action has won praise from former Malaysian deputy prime minister Anwar Ibrahim, Jumabhoy points out. Anwar, on a recent trip to London to meet British ministers, had compared the authorities’ shutting down of the banks and jailing the individuals involved with the inaction of the British, despite the money trail running through the UK.

“It might be argued that they should have stopped the money coming to Singapore in the first place, but such a view would not only be naive, but impossible to enforce,” Jumabhoy says. “Singapore is an international financial centre and all international financial centres are prey to illicit funds. The system depends on the banks and other financial institutions declaring when they have suspicions of the funds received.”

Kwek Chin Yong, associate managing director, investigations and disputes at Kroll, Asia-Pacific, says that as the alleged offences in Singapore mainly involve money laundering, it would have been necessary to prove a “predicate offence”, or wrongdoing that made the transfers of money in and out of Singapore criminal. “This requires evidence of wrongdoing in Malaysia, which can only be obtained in Malaysia, and would necessarily require the assistance of the Malaysian authorities.”

Assistance, cooperation offered

On their part, the authorities here have reiterated that they have offered active assistance and cooperation to their Malaysian counterparts. “Since 2015, when this issue came up, we’ve responded to every request for information from the Malaysian authorities. We’ve also provided information proactively to the Malaysian authorities without them asking, where we thought the information was relevant to their investigation,” says Ravi Menon, MAS’ managing director.

Speaking at a briefing on MAS’ annual report held on the morning after Najib’s arrest, Menon points out that Singapore has been the only jurisdiction to have taken action against banks and individuals, “in relation to weakness or inadequacies demonstrated in the course of duties with respect to 1MDB transactions and flows”. Menon also says there are ongoing investigations into “certain individuals”, and that “there are others we are looking forward to interviewing”.

Singapore recognises that money laundering is a growing, “important global problem”, says Tharman Shanmugaratnam, deputy prime minister and chairman of MAS. “Our reputation is intact, because we’ve moved swiftly to take enforcement action, and that’s how we keep our bankers on their toes, and to exercise good judgement,” he says in a pre-recorded video that was shown at the launch of the 2017 MAS annual report on July 4.

Now, the offers of help from Singapore are finally being accepted. Since the new government in Malaysia was installed, regulators, law enforcement officers and prosecutors from both sides of the Causeway have met several times. Officials from both sides have discussed, among other things, the recovery of 1MDB-related assets seized in Singapore. In fact, where the assets can be properly traced, The Edge Singapore understands that the repatriation process may begin soon.

In terms of further action against the alleged perpetrators of the 1MDB embezzlement, there could be the option of a joint operation such as in the case of the Keppel Corp bribery case, or the Libor (London Interbank Offered Rate) fixing scandal, says Kroll’s Kwek. But ultimately, it is incumbent on the Malaysian government and authorities to take the lead on further prosecutions.

“While proper investigations and prosecution of key players are now on the cards for countries such as Singapore, that is highly dependent on where these players are. If they reside in Malaysia and Malaysian authorities are already taking action against them, it may be impractical for Singapore to get involved since an offender can only sit in one jail cell at one time,” says Kwek. “If Malaysia wants to prosecute someone, it is likely that other countries will not stand in its way since it is very much a domestic issue.” As former prosecutor Jumabhoy says, “It remains very much for the Malaysians to get their own house in order.”  

1MDB: The Singapore connection

Events leading up to former Malaysian prime minister Najib Razak’s arrest stretch as far back as 2009. A number ofSingapore-based financial institutions and individuals were involved. Many have been questioned, some have been charged and convicted and some remain under investigation. The funds that flowed through Singapore could amount to at least US$3.3 billion ($4.5 billion). So far, five individuals have been convicted by Singapore courts for a variety of charges, including witness tampering and forgery. Three others were slapped with prohibition orders that ban them from working in the financial services industry. Investigations are still ongoing, and arrest warrants have been issued for two individuals: Jho Low and Eric Tan. The following is a recap of the events and the Singapore authorities’ actions.

2009

May 18

• Good Star Ltd, solely owned by Jho Low, is formed in Seychelles

June 9

• A Good Star bank account, with Low as the sole beneficial owner, is opened with RBS Coutts’ Singapore branch

Sept 28

• 1MDB invests US$1 billion for a 40% stake in a joint venture with PetroSaudi International (1MDBPetroSaudi).

The investment is to be made in “immediately available cleared funds” from a Singapore BSI Bank account, with 1MDB as joint beneficial owner.

Sept 30

• US$700 million is transferred to Low’s Good Star account with RBS Coutts Singapore 2011

June 28

• First of five wire transfers from Good Star to the BSI Bank account in Singapore under the name of Abu Dhabi Kuwait Malaysia Investment Corp, whose sole beneficial owner is Low

• A total of US$389 million is transferred between 2011 and Sept 4, 2013

• Low allegedly uses funds from this account to acquire properties, artwork and jewellery in the US

2012

May

• US$1.4 billion is raised in two separate bond offerings; Goldman Sachs is lead arranger

• Between May 25 and Dec 14, US$636 million is diverted from an account held by British Virgin Islands-incorporated company Aabar Investments PJS (Aabar-BVI) to a Standard Chartered Singapore bank account in the name of Blackstone Asia Real Estate Partners. Eric Tan Kim Loong, an associate of Low, is the beneficial owner.

• Another US$465 million is transferred to the same Blackstoneaccount from various sources

• US$238 million is transferred from Aabar-BVI account to a Singapore BSI Bank account belonging to Red Granite Capital, owned by Riza Shahriz Abdul Aziz, Najib’s stepson. Money from Red Granite Capital is allegedly used to buy real estate and fund the Hollywood movie The Wolf of Wall Street.

June 21

• Of US$133 million transferred from the Aabar-BVI account to Red Granite, US$41 million is transferred to a Standard Chartered Singapore bank account belonging to Tan. Money from this account is allegedly used to repay gambling debts racked up by Low and associates in Las Vegas.

Nov 2

• Tan opens “Tanore Account” at Falcon Private Bank in Singapore

2013

March

• Goldman facilitates issue of US$3 billion in 1MDB bonds

• More than US$1.26 billion from the proceeds is diverted to accounts held by Tan, including the Tanore Account at Falcon Private Bank in Singapore

• On March 21 and 25, US$681 million from the Falcon account is transferred to an AmBank account in Malaysia belonging to Najib 2015

March

• The Monetary Authority of Singapore (MAS) commences investigations into 1MDB-related fund flows 2016 February

• Singapore confirms ongoing probe when BSI Bank private banker Yak Yew Chee applies to court to release funds that had been frozen April 15

• BSI Bank wealth planner Yeo Jiawei is charged in court. He would face a total of 11 charges. May 24

• MAS shuts down BSI Bank in Singapore for breaches of antimony laundering regulations and gross misconduct. Six BSI bankers, including Yeo and Yak, are referred to the public prosecutor. July 21

• The US Department of Justice announces its intention to seek the forfeiture and recovery of more than US$1 billion in assets linked to 1MDB

• The Attorney-General’s Chambers, Commercial Affairs Department (CAD) and MAS announce investigations beginning March 2015 on related fund flows

• Bank accounts and properties worth $240 million are seized by Singapore; half belongs to Low and his immediate family Oct 11

• MAS shuts down Falcon Private Bank Singapore, for “serious failures” in anti-money laundering controls between March 2012 and May 2015

Oct 31

• Yeo’s four-week-long trial begins

• He is painted as the nexus with the highest number of direct connections to a web of shell companies belonging to clients and managed by various service providers. In particular, Yeo helped to manage transactions of an entity called Brazen Sky, a subsidiary of 1MDB, which owns dubious assets via a convoluted fund structure.

Nov 11

• Yak, named as Low’s relationship manager, pleads guilty. He is sentenced to 18 weeks’ jail and fined $24,000.

Dec 2

• MAS fines Standard Chartered Bank Singapore $5.2 million and Coutts & Co’s Singapore branch $2.4 million for breaches of anti-money laundering regulations

• MAS states its intention to issue a prohibition order on Tim Leissner, former director of Goldman Sachs (Asia) and a key person dealing with 1MDB

Dec 16

• Yvonne Seah, Yak’s colleague at BSI, pleads guilty. She is jailed two weeks and fined $10,000.

Dec 22

• Yeo is sentenced to 30 months’ jail. He appeals. 2017

May 30

• MAS announces completion of a two-year review of banks involved in 1MDB-related transactions known so far, describing the case as “the most extensive” money-laundering probe so far

• Fines imposed on eight banks, including BSI Bank and Falcon Private Bank, which were also shut down

• Eight individuals slapped with penalties, including lifelong prohibition orders, jail terms and fines

July 12

• Yeo pleads guilty to a series of offences, including one that involves siphoning profits from 1MDB subsidiary Brazen Sky. He offers to help authorities in their investigations into Low.

2018

May 15

• In a joint statement, MAS and CAD say they are ready to render further assistance to Malaysia in 1MDB-related probes

July

• MAS managing director Ravi Menon reiterates that investigations by CAD are ongoing; Malaysian authorities have stepped up their investigations with the change in government, and information exchanges are ongoing. According to the Singapore Police Force, the arrest warrants for Low and Tan are still in force.