Malaysia rebuffs Swiss inquiries into 1MDB

Ralph Atkins in Bern and Jeevan Vasagar in Singapore
Financial Times
10th Nov 2016

Refusal adds to concerns about Kuala Lumpur’s response to multiple investigations

Malaysia has rebuffed Swiss efforts to investigate multibillion-dollar corruption allegations surrounding the 1MDB state investment fund.

Officials in Kuala Lumpur refused an appeal from Swiss authorities for help in gathering evidence into claims that up to $4.8bn was diverted from companies linked to 1MDB, a fund set up by Najib Razak, Malaysia’s prime minister.

The refusal will add to questions about the adequacy of Malaysia’s apparent response to an affair that is the subject of multiple international inquiries.

Switzerland had twice asked Malaysia for mutual legal assistance, Michael Lauber, the Swiss attorney-general, said in an interview.

“Very recently we have had the response that the Malaysian authorities will not reply to our request,” he said. “They just said that under their legal framework, they can’t reply.”

Mr Lauber insisted that the Swiss criminal investigations would not be derailed, citing help from Singapore as well as US and European authorities.

“We will protect the integrity of our financial centre as others protect theirs. For that we need international co-operation and if, for whatever reason, there is none — as is the case here with Malaysia — we will find other ways, and we have great co-operation with several other jurisdictions,” he said.

“At the moment, I do not see any harm or direct impact on our investigations. That might change — but it is too early to say.”

The scale of the alleged misappropriation of funds could expand beyond the $4.8bn announced this year, he hinted. “Where does it end? I don’t know,” he said.

Mr Lauber refused to be drawn on reasons for Malaysia’s refusal to co-operate. “As a prosecutor, I am not the one to speculate about the reasons behind it,” he said.

The Malaysian attorney-general’s chambers said it was unable to accede to Switzerland’s requests because of a continuing criminal investigation by Malaysian police in relation to matters concerning 1MDB. “The attorney-general is of the opinion that these requests could prejudice a criminal matter in Malaysia,” it said.

Malaysia was committed to co-operating with international partners and there was “no issue of Malaysia blocking the Swiss criminal inquiry”, it added.

As international pressure on Malaysia’s rulers has mounted, Mr Najib has tightened his grip on power at home, replacing the attorney-general and sacking a critical deputy prime minister. The new attorney-general ruled in January that Mr Najib, who denies any wrongdoing, has no case to answer over $681m transferred into his personal bank account.

Mohamed Apandi Ali, the attorney-general, ordered Malaysia’s anti-corruption agency to close down its investigation into the transfers into Mr Najib’s account and shut a separate inquiry into SRC International, a 1MDB subsidiary.

Two Swiss banks, four people and “unknown persons” are under investigation in Swiss criminal proceedings related to 1MDB.

Mr Najib is not involved in the Swiss inquiries, Mr Lauber confirmed. “Our goal is not to go against any foreign, politically-exposed persons so long as there is no direct impact on our investigations, which are clearly focused on the Swiss financial centre and maintaining its integrity,” Mr Lauber said.

The 1MDB affair is also being investigated in Singapore, where two Swiss banks have been shut down over money-laundering lapses, and the US, where prosecutors have moved to seize property and fine art allegedly acquired with money siphoned off from the economic development fund.

Malaysia’s premier warmly welcomed the election of Donald Trump, a result he said was a sign that Americans wanted their country “less embroiled in foreign interventions”. The US civil forfeiture claim said that $681m had been transferred to the account of a Malaysian public official, whose biography matches that of Mr Najib.

Mr Lauber did not expect the US election to lead to diminished co-operation. “Until now, our co-operation with our US Department of Justice partners and in particular with Loretta Lynch [US attorney-general] has been excellent — whether in fighting terrorism, organised crime, economic crime or money laundering,” he said. “I am confident that we can continue our co-operation because there is always a mutual interest in assisting each other on huge cases like this one.”

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