DAP politician presses KL for update on 1MDB's US$1b in BSI Singapore

DAP politician presses KL for update on 1MDB's US$1b in BSI Singapore

A MALAYSIAN opposition lawmaker has demanded to know Putrajaya's plans for retrieving the US$1 billion which the troubled 1MDB has in BSI Bank Singapore, following the move by the Monetary Authority of Singapore (MAS) to shut down the bank for breaching anti-money laundering rules in connection with the state-owned entity.

Tony Pua of the Democratic Action Party (DAP) has sought confirmation that the Malaysian authorities are looking into bringing back the funds, even as the developments in Singapore and Switzerland have been met with resounding silence from Putrajaya.

Prime Minister (and Finance Minister) Najib Razak and his administration have not responded to reports of MAS' termination of BSI's merchant banking licence and referral of six of its senior-management employees to the public prosecutor to assess whether criminal charges should be brought against them.

Putrajaya has also duly ignored the announcement by the Swiss Attorney-General (AG) that he will start legal proceedings against BSI SA based on information from criminal proceedings into 1MDB and the issues raised by Switzerland's Financial Markets Supervisory Authority (Finma).

Reports of the developments in Singapore and Switzerland have been buried in Malaysia's mainstream English media, although the repercussions on the country could be enormous, given the amounts - potentially up to US$4 billion, said the Swiss AG - alleged to have been plundered from the strategic development fund.

Mr Pua told reporters on Wednesday: "We call upon 1MDB and the Minister of Finance Datuk Seri Najib Razak to explain the steps which will be taken to withdraw the assets from BSI and the bank to which they will move these assets." He noted that 1MDB has refused to provide bank statements or supporting documents that justify the assets' existence or worth.

The amount with BSI is part of the US$2.3 billion which 1MDB deposited in the Cayman Islands after a failed joint venture with PetroSaudi International, and is among the many transactions under probe by regulators in various jurisdictions.

But Mr Najib continues to deny that misappropriation has occurred in 1MDB, saying that it only has "weaknesses" in its administration, a conclusion he attributed to a parliamentary committee probe into the company.

His absence in Parliament in the current session and reliance on written replies has drawn criticism that he fears tough questions and is disrespectful of the House.

1MDB has denied wrongdoing, as has Mr Najib, who chairs its advisory panel.

On Tuesday, the company said it remains "committed to fully cooperating with any foreign lawful authority" but that it had yet to be contacted.

The latest developments are likely to deepen investor distrust, given the foot dragging in demanding accountability.

A corporate adviser observed: "Clearly, they have different standards, but the (local) investigators are reporting to the same person (involved)."

Malaysia's leaders are ignoring the developments, and Mr Najib's standing within his coalition Barisan Nasional remains intact, said the adviser. He added that Attorney-General Apandi Ali - the only individual with the prerogative to initiative criminal proceedings - appears unwilling to act.

Another executive, saying that the demand for action in the country needs to get louder, said: "The weakness is the system."

But with investigations into 1MDB extending beyond Malaysia to about half a dozen other jurisdictions and moving up a notch, there is a growing sense that it is only a matter of time before the shoe is on the other foot.

A commentator on a news portal wrote in a post: "Dubious dealings, duplicity in transactions, dirty money laundered. These are the trade craft of 1MDB to the world. Yet in Malaysia, it is declared clinically clean... Slowly but surely, the trail seems to be leading to a trial of the century."

So toxic has 1MDB's reputation become that its partners in the real estate projects of Bandar Malaysia and Tun Razak Exchange have had problems raising finance, deputy finance minister Johari Abdul Ghani revealed last week.

Meanwhile, the BSI Group, in a statement released in Switzerland and Singapore on Wednesday, clarified that the bank in Singapore is operating normally, despite the decision by the MAS to withdraw the bank's status as a merchant bank.

The withdrawal of that status will take place only down the road, given that MAS "will allow the transfer of the Singapore's subsidiary's assets and liabilities to the Singapore branch of EFG or the parent entity, BSI SA".

The statement noted that MAS has stated that the bank remains solvent and "has assets in excess of its liabilities and commitments".

The bank is not affected by the financial penalties levied by MAS and Finma, as these will be paid out from the BSI's General Reserves for Banking Risks. "Furthermore, the bank is in a very comfortable position in terms of liquidity," the bank said.

BSI's acquisition by EFG was approved by Finma on Tuesday.

Referring to the MAS allowing the transfer of the BSI's Singapore subsidiary's assets and liabilities to the Singapore branch of EFG, BSI said in the statement: "This marks an important milestone to the completion of the transaction that will create one of the largest Swiss private banks and this will provide long-term stability for our clients."

BSI continues to operate as usual with a strong focus on client needs and with the objective of achieving a smooth, quick integration with EFG, it added.


This article was first published on May 26, 2016.
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