This article first appeared in The Edge Financial Daily, on March 24, 2016.
KUALA LUMPUR: The central bank is in the midst of pursuing appropriate “administrative enforcement actions” against 1Malaysia Development Bhd (1MDB) for failing to substantiate the reasons it gave as to why it could not repatriate a sum of US$1.83 billion (RM7.34 billion) it invested overseas.
Bank Negara Malaysia (BNM) Governor Tan Sri Dr Zeti Akhtar Aziz said this yesterday after revealing that the bank had requested for the controversial state-owned strategic investment fund to submit documentary evidence in October last year to substantiate its claim that the remainder of the sum not spent by the fund had been earmarked for a debt asset swap arrangement.
“At this stage, we have yet to receive that. The date [for the submission] has expired. As a result, we are now in the process of pursuing appropriate administrative enforcement actions that are allowed under the laws,” she told a media briefing on the bank’s 2015 annual report. However, she did not say when the deadline is.
The move could possibly result in a penalty or compound, she added. However, the proposed administrative enforcement actions, which will be submitted to the Attorney-General’s Chambers (AGC) before Zeti’s tenure ends, are subject to endorsement by the AGC.
“This is different from criminal action. It will not result in a court action; it is for breaches under the rules and regulations under the bank’s purview,” she said, referring to the bank’s earlier recommendation to the AGC to initiate criminal prosecution against 1MDB for breaches under the Exchange Control Act 1953 (ECA), which was turned down by the AGC despite the bank’s appeal for a review.
Zeti also promised to resolve this issue with 1MDB before she hands over the reins to her successor. “It happened during my term in office and I would like to hand over a clean slate to the next governor.”
Asked if 1MDB’s issue would be one of the regrets that mar her term with the central bank if it is not resolved, she said: “I would like to have a high degree of confidence that the matter would be resolved.”
The AGC in September last year cleared 1MDB officials of any wrongdoing with regard to the investigation carried out by BNM, and directed that no further action should be taken. Following that, BNM had requested for a review of its decision, but the AGC held firm on the grounds that there was no new evidence.
Subsequently, the central bank revoked three permissions granted to 1MDB under the ECA for investments abroad totalling US$1.83 billion, saying that the fund had obtained permission required under the ECA for 1MDB’s investments abroad based on inaccurate or incomplete disclosure of information.
It also issued a directive to 1MDB to repatriate the sum to Malaysia and to submit a plan for that. 1MDB then said the sum had been spent or earmarked for debt settlement arrangements. The money was originally for equity and loan investments in a joint venture with oil company PetroSaudi International Ltd between 2009 and 2011.
BNM was previously part of a joint special task force headed by former attorney-general Tan Sri Abdul Gani Patail, which was probing allegations made by The Wall Street Journal that funds originating from 1MDB amounting to RM2.6 billion had made their way into Prime Minister Datuk Seri Najib Razak’s personal accounts.
In an immediate response, 1MDB issued a statement yesterday saying that it had yet to receive any official correspondence or confirmation from BNM “on the specific matters attributed to the governor today (yesterday)”.
“We are therefore unable to comment further. However, we highlight that 1MDB has in the course of the past 12 months fully cooperated to the extent possible with BNM investigations, including providing documentary evidence where available,” it said.
It added that 1MDB is committed to continued cooperation with BNM and will provide any further information that may be required by the central bank if it possesses such information, and if it is possible under the law.
Meanwhile, when asked if she had confirmed to former deputy prime minister Tan Sri Muhyiddin Yassin that the US$1.103 billion, which 1MDB invested in the Cayman Islands fund, did not actually go into 1MDB’s accounts in BSI Bank Ltd Singapore, Zeti said she has had many meetings with Muhyiddin in her official capacity, but could not recall the specifics of what was discussed.
“I never had a meeting specifically to discuss that...If I did discuss it with him (Muhyiddin), it should be more broadly and [about] what was happening. That was quite some time ago.
“As far as 1MDB is concerned, what we are doing now is relating to the three approvals that we gave. That is the follow-up action we have taken and it is not related to what you are referring to. What you are referring to, the AGC has concluded the case already,” she added.
Najib, who is also finance minister, told Parliament last March the US$1.103 billion was brought back, but kept in BSI Bank, Singapore. But two months later, the finance ministry issued a correction to its March written reply, saying the US$1.103 billion transferred by 1MDB from Cayman Islands to Singapore was money “redeemed” in the form of assets in US dollars.
Later, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah clarified that the assets were in fact in the form of “units”, but the explanation added to the confusion when he refused to explain what it meant.
Muhyiddin told a news portal on Tuesday he had asked Zeti if it was true that the money had not gone into the BSI account, adding that Zeti had confirmed that to him.