Central Banks

Malaysian central bank urged criminal prosecution of state fund 1MDB

Malaysian Prime Minister Najib Razak on April 3, 2014 in Perth, Australia
Richard Wainwright | Getty Images

Malaysia's central bank said on Friday it had urged the country's attorney general to begin criminal prosecution of troubled fund 1MDB after completing its investigation, piling more pressure on Prime Minister Najib Razak who chairs the fund's advisory board.

At the centre of a political crisis over its debt of nearly 42 billion ringgit ($11.5 billion) and alleged financial graft, 1MDB is the subject of several probes by different authorities, including Malaysia's central bank.

The central bank's statement comes just one day after the attorney general said it had seen a report of the central bank's investigation and concluded that 1MDB officials had not committed any offence. The attorney general, appointed by the prime minister in late July, also said it had rejected a central bank request for a review of the decision.

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In its statement, the central bank also said 1MDB had secured permits for investment abroad based on inaccurate or incomplete disclosure of information, thus breaching domestic regulations.

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The central bank added it revoked three permits granted to 1MDB for investments abroad totalling $1.83 billion and ordered the state fund to repatriate the funds to Malaysia.

1MDB said in response that the $1.83 billion overseas investments related to equity and murabaha loan investments in a joint venture with PetroSaudi in 2009 to 2011 that were converted in September 2012 into fund units valued at US$2.318 billion.

This sum was redeemed in 2014 and 2015, with proceeds being substantially utilised, it said, adding that the funds had either been spent or were earmarked for debt settlement.

"1MDB has painstakingly provided multiple detailed written and verbal explanations of these facts to BNM (central bank) between June and end-September 2015," the statement said.

The attorney general's office declined to comment.

In July, the Wall Street Journal reported that investigators looking into 1MDB had identified a payment of nearly $700 million into a bank account under Najib's name. Reuters has not independently verified the report.