This article first appeared in The Edge Financial Daily on August 4, 2017

KUALA LUMPUR: A direct payment by the government is the only way 1Malaysia Development Bhd (1MDB) can settle its debts to the International Petroleum Investment Company (IPIC), opposition parliamentarian Tony Pua claimed yesterday.

Referring to the troubled fund’s statement that it will meet its debt obligations to IPIC “primarily via monetisation of 1MDB-owned investment fund units”, Pua said he doesn’t think any bank would be prepared to facilitate the sale of the units.

1MDB has failed to meet its self-imposed deadline to repay its debts to IPIC. The first instalment of US$602.725 million (RM2.58 billion) was due to the Abu Dhabi state-owned sovereign fund on July 31 as part of the settlement arrived in the London Court of International Arbitration among IPIC, 1MDB and the finance ministry in April.

Now with the payment in default, 1MDB has said it “is awaiting funds that were due to be received in July. Due to the need for additional regulatory approvals, the receipt of those funds has been delayed to August”.

In a statement, Pua said: “There is no bank in the world today which is willing to process the ‘sale’ of 1MDB-owned investment fund ‘units’. This is because the United States Department of Justice has stated that these ‘units’ were fraudulent.

“They were created to cover up the more than US$1 billion which was misappropriated by 1MDB to Good Star Ltd when the intent was to have invested with Petrosaudi International Ltd,” Pua said.

“In fact, the Singapore courts [have] also confirmed that the financial analyst from NRA Capital in Singapore was bribed to produce the false valuation report on these investment ‘units’,” he added.

Therefore, claimed Pua, any bank which facilitates a transaction involving the sale of the investment units by 1MDB to any party would be guilty of facilitating money laundering.

He noted that BSI Bank, the Singapore branch of the 132-year-old Swiss private bank which was the “custodian bank” for the 1MDB investment, had already been punished. Its merchant banking licence was terminated by Singapore, and subsequently, Switzerland’s financial regulator, Finma, demanded that the bank be dissolved.

“No bank worth its salt would want to experience and endure the same fate as BSI Bank or many other banks which have been fined and punished as a result of their entanglement with 1MDB,” said Pua.

The only way for 1MDB to repay IPIC, he said, would be a direct payment by the Malaysian government to IPIC.

“However, if that were to happen, it would be a direct admission by the government that 1MDB is carrying the fraudulent investment and billions of dollars have been lost and stolen from the company, which require a further mega-bailout from the country’s coffers,” he said.