MALAYSIA is contemplating legal action against foreign banks that allegedly failed to properly execute the ‘Know Your Client’ (KYC) verification process, allowing funds from the scandal-ridden 1Malaysia Development Bhd (1MDB) to enter unintended accounts.
At least eight foreign banks are implicated in facilitating such transactions across various countries where 1MDB money flowed.
1MDB taskforce chairperson Datuk Seri Johari Abdul Ghani revealed that legal action could be initiated against banks found negligent in KYC procedures.
“By right, we can initiate legal action against such banks which did not perform KYC properly.
“If the banks want to fight (the legal action), we can fight back, but if the amount involved is not too large, we usually consider an out-of-court settlement,” Utusan Malaysia quoted him as saying at an interview session with local TV stations last night (Dec 20).
Johari explained that banks involved in such cases typically prefer avoiding their names being associated with the 1MDB scandal.
The Plantation and Commodities Minister added that legal action would represent the second phase of the recovery process, with the first phase being settlement, as demonstrated by the recent agreement with Goldman Sachs Group.
Moreover, he confirmed the ongoing role of the 1MDB taskforce, citing “unsettled issues” in the recovery of 1MDB-related assets.
“We are at a major recovery stage from Goldman Sachs. It’s just that there’s a dispute with the bank’s guarantee to pay US$1.4 bil (RM6.4 bil) in 1MDB assets recovered from around the world. It does not want to pay up.
“We have given four extensions, but it (Goldman) still does not want to pay. So, we have to take the case to arbitration.”
Last October, Goldman Sachs filed legal action against Malaysia at the London Court of International Arbitration, contesting the settlement agreement linked to its role in the 1MDB affair.
Both parties were entangled in a disagreement concerning a 2020 settlement agreement, where the bank committed to paying US$3.9 bil (RM18.41 bil) to resolve Malaysia’s criminal investigation into its involvement in the 1MDB scandal.
As per a regulatory filing this year, Goldman Sachs indicated an obligation for a one-time interim payment of US$250 mil if the Malaysian government had not obtained at least US$500 mil in assets and proceeds by August of the previous year.
Furthermore, Johari noted that the taskforce is actively recovering 1MDB funds from multiple countries, although specific details regarding the exact amount were not disclosed. – Dec 21, 2023
