By JAKE MAXWELL WATTS and P.R. VENKAT
Wall Street Journal
Nov. 11, 2016
Singapore is the first country to convict someone in the alleged fraud at the Malaysian state fund
SINGAPORE—A Singapore court Friday sentenced a key suspect in an ongoing probe into alleged misappropriation at Malaysian state fund 1MDB, in the first conviction of a person linked to the alleged multibillion-dollar fraud.
Yak Yew Chee, 57, the banker in charge of managing the relationship with 1MDB at the Singapore branch of Swiss bank BSI SA, on Friday pleaded guilty to two charges of forgery and two charges of failing to report suspicious transactions related to dealings with the fund. He was sentenced to 18 weeks imprisonment and a fine of 24,000 Singapore dollars (US$17,105), and agreed to surrender S$7.5 million in salary and bonuses previously frozen by investigators.
The conviction marks a milestone in the investigation of what happened at 1MDB, or 1Malaysia Development Bhd., a fund set up by Malaysian Prime Minister Najib Razak in 2009 that raised as much as US$13 billion — with a public mandate to promote the country’s economic development.
Investigators in at least five countries are probing 1MDB’s finances in response to allegations that billions of dollars have gone missing. Swiss investigators say they believe that as much as US$4 billion was misappropriated from the fund through several banks, including BSI. The U.S. Department of Justice has launched a civil case to seize assets connected to the case.
1MDB and Mr. Najib have denied any wrongdoing and pledged cooperation with any lawful investigation. The Malaysian attorney general has said the prime minister acted legally.
Malaysian authorities, however, have declined to cooperate with Singapore’s probe of 1MDB’s finances, according to people familiar with the matter. On Friday, Switzerland’s Office of the Attorney General also said that Malaysia has refused to help Swiss investigators looking into the alleged misappropriation.
Mr. Yak’s criminal conviction in Singapore stands in contrast to Malaysia, which hasn’t charged anyone as a result of its investigations.
The sentencing is also a key step for Singapore, which is trying to rebuild a reputation that the city-state’s central bank managing director has admitted was damaged by its association with 1MDB’s alleged fraud. Prosecutors in Singapore have said the fund’s transactions are part of the largest money-laundering probe they have ever conducted.
“It is imperative that the public confidence in the integrity of Singapore’s banking and financial industry is zealously protected,” Jennifer Marie, the judge presiding over Mr. Yak’s sentencing, said Friday.
Mr. Yak’s role at BSI was to find new clients for the bank and act as liaison between them and the bank’s wealth-management staff, which implemented instructions on a client’s behalf — a job for which Mr. Yak earned as much as S$27 million in salary and bonuses between 2011 and 2014, according to Singapore court documents.
Mr. Yak was BSI’s relationship manager for 1MDB and Malaysian financier Low Taek Jho, prosecutors said. Singapore investigators have called Mr. Low, known as Jho Low, a “key person of interest” in their investigation into the alleged 1MDB misappropriation.
Mr. Low had pressured Mr. Yak to rush transactions through BSI bank without full due diligence to verify their authenticity, Mr. Yak’s lawyer, Lee Teck Leng, said in submissions to the court.
Mr. Low had declined to provide further explanation for certain transactions on the grounds that the deals were government-to-government “and hence, state secret,” the lawyer said. He noted that Mr. Yak was motivated by a desire to please Mr. Low, who Mr. Yak called the most important customer at BSI.
Mr. Yak’s lawyer said in his submissions that his client had no grounds to believe during his employment at BSI that Mr. Low was involved in allegedly criminal conduct and that BSI’s top management “was always prepared to act on [Mr.] Low’s requests.”
Mr. Low couldn’t be reached for comment. He has previously denied any wrongdoing in his dealings related to 1MDB. BSI has said it is cooperating fully with authorities and has improved its anti-money-laundering controls.
Mr. Yak is one of three former employees at BSI who have been charged in Singapore with various offenses related to their handling of 1MDB funds. In addition to the four charges he pleaded guilty to on Friday, Mr. Yak is charged with one additional count of forgery and two additional counts of failing to report suspicious transactions between 2012 and 2014, during his employment by BSI.
The judge agreed to consider the additional charges against him in her sentencing. The prosecution won’t pursue those charges separately.
In a neighboring courtroom, Friday, the trial continued of Mr. Yak’s former colleague, wealth planner Yeo Jiawei, 33, who faces four charges of attempting to pervert the course of justice. Mr. Yeo is fighting all the charges against him in court.
In October, Mr. Yak and his former subordinate Yvonne Seah, 45, were charged in Singapore’s state courts with three counts each of forgery and four counts each of failing to report suspicious transactions. No pleas were entered at that time, and both were released on bail.
The forgery charges, upon conviction, carry a maximum jail term each of up to four years. Failing to report a suspicious transaction is punishable upon conviction by a fine of not more than 20,000 Singapore dollars (about $14,500).
At the time Ms. Seah was charged, her lawyer declined to comment, saying he needed to review the charges. On Friday, he declined further comment.