KUALA LUMPUR (June 3): Bank Negara Malaysia (BNM) has commenced a "formal enquiry" into 1Malaysia Development Bhd (1MDB) to examine if it has contravened any of the central bank’s rules and legislation.
 
In a statement this evening, BNM said the enquiry involves the issuance of a legal directive requiring the provision of information from 1MDB's board and management within a specified timeframe.

“Under the Financial Services Act 2013, the penalty for failure to meet this request can result in a fine of up to RM50 million or up to 10 years in prison or both,” the statement said.

The central bank said it is also taking statements from individuals involved in the governance process and obtaining information from other relevant domestic and foreign parties.

“In addition, BNM has forwarded information received from foreign authorities to the relevant investigation agencies after obtaining the permission from the foreign authorities,” it said.

BNM added that it could not disclose further details of its investigation at this moment as it could undermine the outcome.

“The central bank is doing everything within the powers provided under its legislation, including collaborating with other agencies, to contribute towards a swift resolution of the matter,” it said.

BNM’s statement comes on the heels of strong criticism for allegedly failing to disclose the details of a report from the Monetory Authority of Singapore regarding 1MDB’s account in BSI Bank Ltd.

Notwithstanding fiery criticisms by opposition party leaders over the past few months, former Prime Minister Tun Dr Mahathir Mohamad's recent warning that BNM could be found guilty if it tried to cover up for 1MDB’s 'lies' seems to have done the trick.

In its statement today, BNM said widespread news reports and commentaries regarding 1MDB, which had chalked up a RM42 billion debt, had raised questions on whether it continued to uphold the trust that was placed on it.

Hence, it is seeking to clarify its role as the Central Bank with respect to any resident entity, including 1MDB, which makes investments abroad or obtains offshore borrowings under Section 214 of the Financial Services Act 2013, and under the Exchange Control Act 1953 that was in force prior to 2013.

“All investments that exceed RM50 million per calendar year and any offshore borrowings that exceed RM100 million by resident entities require the Central Bank’s approval.

“In relation to this, all submissions that were made by 1MDB have had to comply with the same approval criteria that is applied to submissions by other business entities.

“If the criteria is not met, the submission will be rejected.  No leniency or special exceptions were accorded to 1MDB,” it stressed.

BNM added that in terms of cross border fund movements, it also relied on financial intelligence authorities in foreign jurisdictions to bring its attention to irregular or suspicious transactions made in their jurisdiction.

These arrangements for information sharing must conform to international protocols, and remain confidential as any breach would lead to the termination of such arrangements, it said.

“These arrangements also enable us to share the information with relevant domestic investigation authorities after securing the permission of the foreign authorities. The scope provided under the Central Bank’s legislation does not provide powers for us to investigate in areas such as fraud, tax evasion, corruption, cheating and criminal breach of trust.

"These will need to be pursued by other law enforcement agencies,” it added.