Dirty money

By Una Galani
16 June 2017

1MDB’s money trail is quite something. Cash siphoned from the disgraced Malaysian sovereign fund ended up in a luxury yacht, technology startups, the movie “Dumb and Dumber To”, a pink diamond pendant, and artwork by Picasso and Basquiat, the U.S. Department of Justice alleges. This reads like a parody of the shopping habits of the rich and decadent.

With the latest filing, made public on Thursday, authorities now claim more than $4.5 billion was misappropriated between 2009 and 2015. Out of that, the DOJ is seeking to seize $1.7 billion of assets. The lawsuit shows in gritty detail how money was handled by the world’s biggest banks including Goldman Sachs and Deutsche Bank. They are not accused of wrongdoing, but no one comes out looking good in the largest case brought under the department’s so-called “Kleptocracy Asset Recovery Initiative”.

This will not be easy, however. Seizing assets is slow, difficult work, and returning the proceeds can take a long time too. A Financial Times report on the unit last year said the DOJ had returned only 5 percent of the funds it has intercepted to its rightful owners. Anything recovered in this case is unlikely to return directly to the victim nation, given the case implicates “Malaysian Official 1”, a figure who matches the profile of Prime Minister Najib Razak. In similar cases, the DOJ has previously allowed funds to flow back via entities like the World Bank. Najib, meanwhile, has denied any wrongdoing and Malaysia insists the DOJ has not sought any assistance from the government or 1MDB.

The sad reality is that the days of U.S. crusades against global financial crime look numbered. This is unlikely to be a priority for the administration of U.S. President Donald Trump, whose own business empire creates numerous potential conflicts of interest. And the government’s distaste for overseas alliances is likely to undercut the international cooperation needed to build complex cross-border cases. The move against 1MDB may be the last gasp of a fight to hold the world’s kleptocrats to account.

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