Friday, August 12, 2016

Bar:- Malaysian Authorities Must Treat Grave US Department of Justice Allegations with Utmost Seriousness and Undertake an Immediate Inquiry

Press Release | Malaysian Authorities Must Treat Grave US Department of Justice Allegations with Utmost Seriousness and Undertake an Immediate Inquiry

ImageThe Malaysian Bar is deeply disturbed by the grim disclosures contained in the complaint filed by the United States Department of Justice (“DOJ”)[1] “to forfeit assets involved in and traceable to an international conspiracy to launder money misappropriated from 1Malaysia Development Berhad (“1MDB”)…”[2] The DOJ has made serious allegations of siphoning or diversion of funds, fraud, and the misuse of the banking system for illegal activities, by the individuals and entities named in the complaint.

Various persons have in the past weeks sought to interpret the DOJ’s 136-page complaint.  It is appalling that some have deliberately set out to distort the proceedings, and have attempted to create confusion, ostensibly to protect wrongdoers.  In the interest of upholding the rule of law and the cause of justice, the thrust, purpose and ramifications of the DOJ proceedings must be appreciated. 

The legal proceeding commenced by the DOJ seeking the forfeiture of assets — including rights to profits, moveable assets and real property — constitute a civil action.  These assets, located primarily, but not exclusively, in the United States, are alleged to be proceeds from criminal conduct.  The DOJ maintains that this is the largest single asset seizure action ever brought under its Kleptocracy Asset Recovery Initiative.[3] 

The DOJ’s court document states that the assets to be forfeited represent “a portion of the proceeds of over [US]$3.5 billion misappropriated from 1MDB.”[4]  It has been reported that the United States authorities intend “to recover more than [US]$1 billion that was laundered through the United States and traceable to the conspiracy.”[5] In this regard, it would appear from the court document that the United States authorities possess comprehensive knowledge of the movement of the alleged misappropriated funds, have sighted relevant documentary evidence, and even reviewed telephone conversations.  The substance, depth and reach of the allegations are compelling, and should not be ignored.  The affected parties will have the opportunity to challenge the DOJ’s action in court, hence the process is transparent and adheres to the principles of natural justice.  

The complaint made by the DOJ does not preclude criminal action, as the forfeiture is but a first step to prevent dissipation of the specified assets.  The act of money laundering, and involvement in a conspiracy to do so, are criminal offences.  Thus, upon forfeiture of the assets, it is likely that there would be criminal proceedings to prosecute those responsible for the alleged misappropriation of 1MDB funds and the laundering of those funds in the United States and elsewhere. 

Such proceedings in the United States should not surprise our law enforcement agencies or officers.  There are similar provisions in our law for the freezing or forfeiture of assets in Malaysia that are connected with money laundering activities or are the proceeds of crime, whether or not any individuals are prosecuted.[6]  These have often subsequently led to the prosecution of individuals.  The laws in Malaysia also allow for criminal proceedings against individuals for alleged money laundering activities, even if those activities occur outside Malaysia.[7]

It is noteworthy that the Malaysian Anti-Corruption Commission has issued a statement confirming that it cooperated with the United States Federal Bureau of Investigation in the latter's investigations.[8]  In international efforts to stop money laundering and curb corruption, many countries — including Malaysia — have passed laws that allow for "universal jurisdiction" in respect of money laundering activities or corrupt practices.  Such legal actions cannot in any way be categorised as attempts to interfere in the domestic affairs of a sovereign state. 

The principal aim of international crime prevention and anti-corruption treaties such as the United Nations Convention against Corruption, which Malaysia ratified in 2008, is to specifically provide for the prosecution of those involved in international or transnational criminal activities.  No country that is a signatory to such treaties or conventions should attempt to hide or shield such persons, or permit such persons to evade or avoid prosecution, or to block access to evidence or information. 

It is untenable to hold that the DOJ document does not show that money has been misappropriated from 1MDB.[9]  The allegations of financial improprieties concerning 1MDB funds — described as having been "stolen, laundered through American financial institutions and used to enrich a few officials and their associates"[10] — are referred to in no fewer than 193 paragraphs in the document. 

Further, it has been reported that 1MDB is being investigated for alleged financial irregularities and possible money laundering in at least nine countries: Australia, Hong Kong, Luxembourg, Singapore, Switzerland, Thailand, United Arab Emirates, United Kingdom and United States of America.[11]  It is significant that immediately after the DOJ announced its action, Singaporean authorities declared that they have seized bank accounts and properties amounting to S$240 million in total, as a result of their own investigations into the flows of 1MDB-related funds through Singapore, which began in March 2015 and are still in progress.[12] 

There are parties who have stated that 1MDB has not suffered any losses but only "has debts".[13]  This is a perverse and unsustainable position, given that the PAC report reportedly named members of 1MDB's senior management that it said should face a criminal investigation,[14] and that five of the twelve members of the PAC have reportedly stated that the PAC's report shows that a total of US$7 billion have flowed out from 1MDB and were unaccounted for.[15]

Several individuals have been specifically named in the DOJ's court document, but not the Prime Minister.  However, this is not to say that he cannot be identified from the descriptive statements contained in the court document.[16]  The conclusion — based on any clear reading of those descriptive statements — that the person named as "MALAYSIAN OFFICIAL 1" in the court document is the Prime Minister appears irresistible.  

The court document contains many other troubling disclosures.  It is alleged that in March 2013, USD681 million was transferred to a bank account belonging to "MALAYSIAN OFFICIAL 1",[17] and that this sum emanated from a 1MDB bond sale.  This allegation contradicts statements by our authorities that the funds were a "personal donation" to the Prime Minister from the Saudi royal family, given to him without any consideration.[18]

In addition, the court document also alleges that USD20 million and a further USD30 million traceable to 1MDB funds, were transferred to the same personal bank account owned by "MALAYSIAN OFFICIAL 1" in 2011 and 2012, respectively.[19]  It would appear that the transfer of these funds had not been previously uncovered or disclosed by any of our enforcement agencies.  These allegations therefore expose deficiencies and flaws in the investigations that have been conducted so far in Malaysia, and a lack of transparency regarding the findings that such investigations have yielded.

While the DOJ's proceedings and any other possible related proceedings in the United States of America must be allowed to take their course and not be prejudged, a fresh and comprehensive investigation of all persons directly or indirectly implicated in the allegations made by the DOJ must be pursued.  These allegations must not be ignored or permitted to be swept under the carpet, as that would only fuel the already existing perception of a cover-up.  In this regard, the recent statement by the PAC, in the wake of the DOJ proceedings, that any further investigation into 1MDB is unnecessary, is deeply disconcerting. 

There is a palpable need for greater fervour, transparency and accountability in the investigation by our enforcement authorities, and for appropriate and concrete action to be taken against all wrongdoers, without delay.  The truth must be revealed and justice must be done. 

Steven Thiru
Malaysian Bar

11 August 2016

[1] Civil suit document filed by the United States Department of Justice dated 20 July 2016 ("DOJ civil suit").
[2] DOJ civil suit, para 5.
[3] Press statement by the United States Department of Justice entitled "United States Seeks to Recover More Than $1 Billion Obtained from Corruption Involving Malaysian Sovereign Wealth Fund" dated 20 July 2016 ("DOJ press statement").
[4] DOJ civil suit, para 33.
[6] Section 41 of the Malaysian Anti-Corruption Commission Act 2009, and Sections 44, 45, 50, 51 and 52 of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001.
[7] Sections 44, 45, 50, 51 and 52 of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001.  Sections 44 and 53 also deal with the freezing and seizure of assets located outside Malaysia.
[8] Press statement issued by the Malaysia Anti-Corruption Commission entitled "SPRM Bekerjasama Dengan FBI" dated 22 July 2016.
[9] Press statement by the Attorney General of Malaysia Tan Sri Dato' Sri Haji Mohamed Apandi Bin Haji Ali entitled "US DEPARTMENT OF JUSTICE FILING OF CIVIL ACTION" dated 21 July 2016.
[12] Joint statement by the Attorney-General's Chambers of Singapore, Commercial Affairs Department of the Singapore Police Force and the Monetary Authority of Singapore entitled "Investigations into 1MDB-Related Fund Flows through Singapore" dated 21 July 2016.
[13] "Don't be blindsided by 1MDB: Najib", New Straits Times Online, 9 August 2015.
[14] "Malaysia's Probe Into 1MDB Fund Was Flawed", Wall Street Journal, 26 May 2016.
[16] (a) DOJ civil suit, para 28: "MALAYSIAN OFFICIAL 1 is a high-ranking official in the Malaysian government who also held a position of authority with 1MDB. During all times relevant to the Complaint, MALAYSIAN OFFICIAL 1 was a "public official" as that term is used in 18 U.S.C. § 1956(c)(7)(B)(iv) and a "public servant" as that term is used in Section 21 of the Malaysian Penal Code."
(b) DOJ civil suit, para 129: "[RIZA SHAHRIZ BIN ABDUL] AZIZ is a relative of MALAYSIAN OFFICIAL 1 and a friend of LOW [TAEK JHO]."
(c) DOJ civil suit, para 39: "Upon its formation, MALAYSIAN OFFICIAL 1 assumed a position of authority with 1MDB. MALAYSIAN OFFICIAL 1 had the authority to approve all appointments to, and removals from, 1MDB's Board of Directors and 1MDB's Senior Management Team. In addition, any financial commitments by 1MDB, including investments, that were likely to affect a guarantee given by the government of Malaysia for the benefit of 1MDB or any policy of the Malaysian government, required, the approval of MALAYSIAN OFFICIAL 1."
(d) DOJ civil suit, para 238: "The Government of Malaysia provided a "Letter of Support," dated March 14, 2013, in connection with the Project Catalyze transaction… the letter is signed by MALAYSIAN OFFICIAL 1.", read together with "A 1MDB default would test limits of Najib's support: Gadfly", StockHut, 19 April 2016.
(e) DOJ civil suit, para 263: "… a press release issued on January 26, 2016, the Malaysian Attorney General confirmed that, "the sum of USD681 million (RM2.08 billion) [was] transferred into the personal account of [MALAYSIAN OFFICIAL 1] between 22.03.2013 and 10.04.2013," and that, " In August 2013, a sum of USD620 million (RM2.03 billion) was returned by [MALAYSIAN OFFICIAL 1]. . . ." The Malaysian Attorney General ultimately characterized the payment of $681 million as a "personal donation to [MALAYSIAN OFFICIAL 1] from the Saudi royal family which was given to him without any consideration."
[17] DOJ civil suit, para 229:  "…between approximately March 21, 2013, and March 25, 2013, $681,000,000 was transferred from the Tanore Account to an account belonging to MALAYSIAN OFFICIAL 1."
[18] Press statement by the Attorney General Tan Sri Dato' Sri Haji Mohamed Apandi bin Haji Ali entitled "IN RELATION TO THE INVESTIGATION PAPERS RETURNED BY MACC ON SRC INTERNATIONAL AND "RM2.6 BILLION" dated 26 March 2016.
[19] DOJ civil suit, para 261.

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