monday, 4 april of 2016

U.S. Asks JPMorgan, Wells Fargo to Save Records Tied to 1MDB

JPMorgan Chase & Co., Deutsche Bank AG and Wells Fargo & Co. have been asked by U.S. authorities to retain and turn over records that may be related to improper transfers from an embattled Malaysian state fund, according to people familiar with the matter.

The banks aren’t targets of the investigation and haven’t been accused by authorities of wrongdoing. As some of the biggest conduits of the global financial system, they join other institutions that have said they’re working with U.S. officials examining money flows connected with 1Malaysia Development Bhd., known as 1MDB.

Goldman Sachs Group Inc., which underwrote $6.5 billion in bond deals for 1MDB, is cooperating with Justice Department efforts to gather information, people familiar with the matter have said, adding there’s no indication Goldman engaged in any wrongdoing. The bank declined to comment.

BSI SA, a Swiss private bank whose Singapore unit handled accounts for 1MDB and related entities, has also said it’s cooperating with international regulators. BSI Chief Executive Officer Stefano Coduri told investors on Thursday that in the context of issues surrounding 1MDB, the bank had exited its Malaysia business. He declined to comment further, saying “there are official investigations.”

JPMorgan, Deutsche Bank and Wells Fargo facilitated transfers for 1MDB and related entities, according to the people familiar with the matter. Representatives for the banks declined to comment.

Ceasing Transactions

One bank received an instruction from the Justice Department not to destroy related documents dating back to 2009, the year 1MDB was created, according to a person familiar with the matter, who asked not to be identified because the information is confidential.

Deutsche Bank Malaysia and JPMorgan’s involvement with 1MDB can be traced back to 2009 when they facilitated fund transfers for the company, according to the person familiar with the matter. Deutsche was also hired as one of the advisers for an initial public offering of 1MDB’s power assets in mid-2014, which never materialized because of an unfavorable market. It also gave a $975 million loan to the company two years ago and 1MDB settled it in 2015.

Authorities from around the world -- including in the U.S., Luxembourg, Switzerland and Singapore -- are trying to piece together evidence to determine if some of the billions of dollars that 1MDB raised since 2009 were siphoned out of its coffers and into the personal accounts of politically connected individuals.

Political Opponents

The fund, under the direction of Malaysian Prime Minister Najib Razak, has been criticized by Najib’s political opponents for ballooning debt levels, a near-miss on a loan payment and accusations of financial mismanagement, prompting former premier and political rival Mahathir Mohamad to call for his resignation.

Both 1MDB and Najib have denied wrongdoing. On Thursday, 1MDB said it hasn’t been contacted by any foreign legal authorities on any matters related to the company, repeating comments made a day earlier by its president, Arul Kanda. “We remain committed to fully cooperating with any lawful authority and investigation,” 1MDB said in a statement.

Some accounts for 1MDB and related entities were handled by BSI’s Singapore unit, according to documents entered into a Singapore court as part of efforts by a former BSI private banker to access funds frozen by the city-state’s central bank.

Singapore Probe

On Thursday, the Monetary Authority of Singapore said that as part of its investigations into 1MDB-related fund flows, it has been conducting “thorough review of various transactions” through the country’s banking system. Singapore is working closely with authorities in other financial centers, MAS added.

Goldman has hired an outside law firm to conduct an internal probe of the bond sales and communications between the firm and 1MDB, people familiar with the matter have said.

U.S. prosecutors subpoenaed Tim Leissner, a former Goldman Sachs banker who oversaw the bond sales for 1MDB, just days after he left the bank earlier this year, said three people familiar with the matter. A German national, Leissner had been chairman of the firm’s Southeast Asia operations. Leissner, who hasn’t been accused of wrongdoing, hasn’t responded to requests for comment placed through his lawyer, Jonathan Cogan.

Saudi Donation

The Malaysian central bank has submitted requests at least twice for the attorney general to begin criminal proceedings against 1MDB. The attorney general’s office dismissed the central bank’s requests, which alleged the fund breached the Exchange Control Act. Bank Negara Malaysia said last month it is pursuing "appropriate administrative enforcement action" against 1MDB.

In July, the then-attorney general said a special task force investigating 1MDB looked into large deposits into Najib’s bank account ahead of the 2013 general election. The prime minister said the funds weren’t used for private benefit.

The government in July installed former Federal Court judge Mohamed Apandi Ali as attorney general, replacing the incumbent months before his scheduled retirement. Apandi said $681 million that went to Najib was a political contribution from the Saudi royal family and that the premier later returned $620 million. In January he cleared Najib of any wrongdoing. 1MDB has denied transferring funds to Najib’s accounts.

(Published by Bloomberg - March 31, 2016)

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