SINGAPORE (Feb 4): A Bloomberg newsbreak on how Low Taek Jho, or Jho Low, made millions from a 2009 bond sale has put the spotlight on the first debt issued by 1Malaysia Development Bhd (1MDB), when it was known as the Terengganu Investment Authority (TIA).

The RM5.0 billion bond sale was arranged by AmInvestment Bank Malaysia and approved by TIA chief executive Shahrol Halmi despite the objection of a shareholder, the Terengganu government.

Jho Low was the official adviser to TIA, which was subsequently taken over by the Minister of Finance Inc and renamed 1MDB.

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The 30-year Islamic bonds, which pay a coupon rate of 5.75%, were sold at a steep discount by AmInvestment on a bought deal and not through a tender, raising a hue and cry among bankers at the time. The then CEO of CIMB Bank Nazir Razak complained to both Bank Negara and the Securities Commission about how the bonds were sold and why the government-guaranteed bonds had to pay a high interest of 5.75% and yet were sold at a discount.

Sources say the regulators made some enquiries but did not pursue the matter further.

But investigators are now looking into it and have discovered the following:

1. AmInvestment sold RM3.8 billion of the bonds to Thai brokerage Country Group Securities. According to Bloomberg, another RM500 million was sold to a Singapore firm but it did not name the company. The Edge Malaysia understands that the firm is Aktis Capital Singapore.

2. The bonds were sold to Country Group and Aktis Capital at a 13% discount — they paid RM87 against the face value of RM100.

3. AmInvestment then immediately resold the bonds on behalf of the two companies to local investors (mainly pension funds and insurers) for between RM100 and RM105, enabling the two entities and their clients to make a big profit  — an estimated RM559 million — on a quick flip.

Country Group then instructed AmInvestment to send US$113 million of the windfall profit to Acme Time Pte Ltd in Singapore.

US investigators have determined that Acme Time’s account in RBS Coutts was controlled by Jho Low and his associate, Eric Tan Kim Loong.

It is interesting to note that on Sept 30, 2009, Tan wrote to RBS Coutts, instructing it to transfer US$20 million to Tarek Obaid’s account at JP Morgan in Switzerland (see letter above). This transfer was carried out a day after 1MDB signed a joint venture with PetroSaudi International, pouring US$1.0 billion into it.

It appears that the US$20 million given by Jho Low to Tarek, who is a shareholder and director of PetroSaudi, was some kind of “fee” and the money came from the profits he had made from flipping the RM5.0 billion TIA bonds.

Money that 1MDB raised from that bond was used to pay the initial US$1.0 billion for the PetroSaudi JV, of which — as investigators around the world have since confirmed, as reported by The Edge Malaysia and Sarawak Report in 2015 — US$700 million was moved to a Jho Low company, Good Star Ltd.

Malaysian investigators are now looking into why AmInvestment did not sell the bonds directly to the eventual buyers — ­insurance companies and pension funds — but instead, facilitated Country Group and Aktis Capital to make large profits through a quick flip.

They are also trying to find out who in AmInvestment approved the transfer of the US$113 million to Acme Time in Singapore.

Who are Country Group and Aktis Capital and their clients? Country Group is a very well connected financial company listed on the Thai Stock Exchange.

Its controlling shareholder Sadawut Taechaubol is a prominent businessman with interests in finance and property development. Among Country Group’s directors are Police Lieutenant General Werapong Chuenpagdee, Police General Somchai Vanichsenee and General Wattaba Sanphanich.

Sources say Jho Low’s father, Larry Low Hock Peng, has Thai roots and knows some of Thailand’s leading businessmen.

This explains why Jho Low chose Country Group as the securities firm to buy and do a quick flip of the bonds.

Aktis Capital is an investment advisory and asset manager for high-net-worth customers. Among its partners is Malaysian Cheah Teik Seng, who interestingly was appointed to the board of Malayan Banking three months after the bonds were issued. He resigned in August 2015.

Investigators are believed to be looking to find out who the clients of Aktis Capital were. Like Jho Low, they also made a lot of money from the flip at the expense of Malaysian taxpayers. Sources say they are believed to be well-connected Malaysians.

As Aktis Capital is in Singapore, Malaysian investigators will need the cooperation of the Monetary Authority of Singapore and Commercial Affairs Department to find out who these people are and whether they had made money inappropriately.

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Who were the PEPS who were clients of Coutts in Singapore?

Revelations that some US$125.5 million in profits from the 2009 sale and resale of RM5.0 billion of bonds linked to 1 Malaysia Development Bhd (1MDB) ended up in Singapore have put the spotlight on the then RBS Coutts branch in the city state and its client Acme Time.

US investigators previously documented that the Acme Time account was controlled by Low Taek Jho (Jho Low) and his associate Eric Tan Kim Loong.

They had revealed in a civil action taken in the US that US$20 million was paid in September 2009 to Tarek Obaid of PetroSaudi International from this Acme Time account at Coutts Singapore. Another US$1.7 million was paid in August 2009 to Casey Tang Keng Chee, then an executive director of 1MDB.

Last Dec 4, Tang was charged in Malaysia for money laundering for criminally receiving the US$1.7 million from Acme Time into his account in Switzerland. On the same day, Malaysian authorities also charged Jho Low and Tan for money laundering over two transfers to Acme Time’s account in Singapore from an account in AmBank Malaysia – US$113 million on May 29, 2009 and US$12.5 million on July 13 the same year.

All three men were charged in absentia as their whereabouts are not known.

At the time that Tang, Jho Low and Tan were charged, the source of the two transfers totalling US$125.5 million to Acme Time was not revealed, except that it came from an account at AmBank.

Bloomberg News on Jan 24 broke the story of the US$125.5 million being profit from a big flip carried on the RM5.0 billion of bonds issued in May 2009 by the Terengganu Investment Authority, which was subsequently renamed 1MDB.

AmBank had bought and then resold RM3.8 billion of the bonds for Country Group Securities of Thailand, whose client is Jho Low, according to Malaysian investigators (see story above). Country Group subsequently asked that the profits be transferred from AmBank to the Acme Time account in Coutts Singapore.

In 2016, Coutts was fined $2.4 million by the Monetary Authority of Singapore for “breaches of MAS’ anti-money laundering (AML) requirements. These breaches occurred in the context of 1MDB-related fund flows through these banks”.

But what is interesting to note is that MAS also found Coutts guilty of breaches as far back as 2003, that is, six years before 1MDB started operating.

According to the Dec 2, 2016 press release by MAS, Coutts had breached “AML requirements in relation to customer due diligence measures for politically exposed persons (PEPs). The relationships for these PEP customer accounts were established between 2003 and 2009”.

MAS added: “The failure to exercise the necessary enhanced due diligence on these accounts was the result of actions or omissions of certain officers who have since left the bank. These officers include Mr Yak Yew Chee and Ms Yvonne Seah, who had left Coutts to join BSI Bank Limited in late 2009.”

It appears that these PEPs may not have been confined to just Jho Low.

1) Who were the other PEPs who were customers of Coutts in Singapore and how high up were they in the then Malaysian government (between 2003 and 2009)?

2) What happened to the remaining sum of US$103.8 million from the US$125.5 million that was sent to the Acme Time account from AmBank? Was it transferred to certain PEPs?

Besides Jho Low, who made millions from the Big Flip in 2009?

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