Prosecutors in Malaysia have filed criminal charges against a number of Goldman Sachs Group Inc. (GS) units and several people over a massive multibillion-dollar bond fraud involving the sovereign wealth fund the 1Malaysia Development Berhad (1MDB). The individuals charged including former Goldman managing directors Roger Ng Chong Hwa and Tim Leissner, financier Jho Low, who is accused of masterminding the fraud, and ex-1MDB general counsel Jasmine Loo Ai Swan.
Malaysia Attorney General Tuan Tommy Thomas said that the criminal charges are related to fake and misleading statements issued in order to steal $2.7B from the proceeds of three 1MDB subsidiary issued-bonds. The bonds, which Goldman organized and underwrote, were valued at over $6B.
The defendants are accused of conspiring together to bribe public officials in Malaysia so as to allow for Goldman’s involvement with the bonds. The investment bank earned about $600M in fees for its work with the Malaysian sovereign fund.
Goldman maintains that it did nothing wrong and contends that ex-Malaysian government officials and the 1MDB fund were the ones who lied to the bank. Now, prosecutors in Malaysia want the investment bank to pay billions of dollars in criminal fines, as well as the $600M in fees it had earned. They want the individual defendants to serve time in prison.
Last month, US federal prosecutors charged Ng, Leissner, Low, and a number of unnamed others of conspiring to misappropriate over $2.7B from the Malaysian fund. The money was allegedly laundered and part of the funds were purportedly used to bribe government officials in Abu Dhabi and Malaysia. Leissner pleaded guilty to conspiracy to violate the Foreign Corrupt Practices Act and conspiracy to launder money. He must forfeit $43.7M.
FinCEN, FINRA, and SEC Fine UBS $15M for Inadequate Anti-Money Laundering Detection
The US Securities and Exchange Commission (SEC) and the Financial Crimes Enforcement Network (FinCEN) of the US Treasury have each fined UBS Financial Services (UBS) $5M for not doing enough to fight money laundering since at least 2004. (The bank finally began implementing new and more effective anti-money laundering detection processes in 2016.) Financial Industry Regulatory Authority (FINRA) also imposed fines over the same purported anti-money laundering (AML) deficiencies—a $4.5M fine for UBS Financial Services and a $500K fine for UBS Securities, LLC.
The fines were imposed after the regulatory bodies found that foreign currency laundering had taken place through at least two US-based UBS branches. According to the three agencies, they each found that due to insufficient staffing at UBS Financial Services, alerts of possible suspect activity became backlogged and submission of mandatory Suspect Activity Reports (SARs) to the federal government were delayed. FinCEN stated that these deficiencies resulted in the financial firm not noticing when nonresident aliens and foreign customers used their securities accounts to move illicit monies via the bank’s different branches.
Under US securities and banking laws, financial institutions must institute and enforce politics and procedures to allow them to look out for and detect suspect activity that may be tied to illegal or illicit transactions, terrorism, embezzling, and other major crimes.
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