ANTI-CORRUPTION campaigner Global Witness is to question the UK financial regulator for declining to investigate two banks for handling more than US$2 billion (RM8 billion) allegedly embezzled from 1Malaysia Development Bhd.
The Financial Times reported that the group will today ask the Financial Conduct Authority (FCA) why it did not probe Royal Bank of Scotland and Standard Chartered, which have been fined by Swiss and Singaporean regulators and investigated by US authorities, over the scandal.
Global Witness, in a 26-page report, said the banks “ignored the rules, turned a blind eye, kept profitable clients and continued handling billions of dollars of dirty money despite clear warning signs”, adding that the 1MDB affair is evidence of “a clear failure” by the two institutions.
US prosecutors said Malaysian officials and their business associates have siphoned billions of dollars in 1MDB monies into personal bank accounts to buy assets, such as RM1 billion luxury yacht Equanimity, which was seized by Indonesia recently, and bankroll Hollywood films, including The Wolf of Wall Street.
Banks are required to carry out extra checks when handling funds from state entities, and must report suspicious transactions, block such transactions if no explanation is given and close the accounts involved if needed.
The UK regulator, on occasion, does not investigate alleged wrongdoing by British institutions when no local assets or clients are involved. In such cases, the FCA relies on foreign regulators to take enforcement action, and follows up with supervisory action to remedy failings if and when needed.
Murray Worthy, author of the Global Witness report, said this is no reason to let the UK regulator off the hook.
“This is one of the biggest corruption cases of all time, and it is worth comparing the UK approach with the US Department of Justice, which is putting huge efforts into going after US$4.5 billion in illicit proceeds,” he was quoted as saying.
The FCA, in an emailed statement, said it is “aware of these matters, and has been liaising with regulatory partners in the jurisdictions in which these activities occurred”.
“We are aware of the action that has been, and is being, taken by those agencies and others, and we are monitoring with interest.”
RBS and Standard Chartered, meanwhile, declined to comment.
It was reported yesterday that Deputy Communications and Multimedia Minister Jailani Johari warned the foreign media to stop putting out fake news on 1MDB.
He said fake news pertaining to 1MDB is being spread to tarnish Prime Minister Najib Razak’s credibility.
“We believe that these efforts are by certain quarters who have a political agenda and are trying to damage the prime minister’s good name ahead of the 14th general election.”
The Financial Times reported that Labour MP Margaret Hodge has called on the FCA to explain itself over its lack of action in the 1MDB case.
“It is time for the FCA to take firm action, to hold banks that handle dirty money to account (and to) explain its apparent inaction over this case, when other countries have completed their investigations over a year ago.”
In 2016, the Monetary Authority of Singapore fined Coutts, the private banking arm of RBS, S$2.4 million (RM7 million) for breaching anti-money laundering regulations and failing to meet due diligence requirements for “politically exposed” individuals.
The Swiss banking regulator fined Coutts 6.5 million Swiss francs (RM26.7 million) last year over a high-risk US$700 million transfer from 1MDB in 2009, after finding that “those responsible failed to follow up on these clear causes for concern”, and instead, chose to “continue with the lucrative business relationships”.
RBS, which sold the global arm of Coutts in 2015, said in its annual report that the FCA is investigating its compliance with money laundering and anti-terrorist financing regulations, adding that the probe is unrelated to 1MDB.
The Monetary Authority of Singapore fined Standard Chartered S$5.2 million for “significant lapses in the bank’s customer due diligence measures and controls for ongoing monitoring”, after US$1.1 billion from 1MDB was transferred to the account of a Malaysian businessman in Singapore.
Following the fine, the bank said it regrets the breaches.
“We reported the suspicious transactions, both before and at the time we exited the accounts in early 2013, and have been fully cooperating with the authorities investigating this matter.”
In its annual report, Standard Chartered said it is in talks with the FCA about “an investigation concerning financial crime controls”, which could result in “a substantial monetary penalty and other civil measures”.
The bank said the probe has nothing to do with 1MDB.
Several other banks have been fined by Singapore regulators over the 1MDB scandal, including Credit Suisse, BSI, UOB and Falcon Bank.
US authorities have also investigated Goldman Sachs for its role in handling bond issues for the Malaysian state investor.