A sweeping U.S. investigation into assets allegedly looted from a state fund in Malaysia has raised the heat on Prime Minister Najib Razik, but it wasn't entirely clear that would dent the two countries' ties.
Malaysia's status as a moderate Muslim-majority nation in Southeast Asia has helped the country develop a solid relationship with the U.S., offering a bulwark against extremism. Indeed, last year, during a visit to Malaysia, U.S. President Barak Obama called the country's voice "critical" on counter-terrorism efforts.
But the long-running scandal over billions of dollars missing from the Malaysia state fund 1MDB came to roost in the U.S.
In July, the U.S. Department of Justice moved to seize more than $1 billion of assets tied to an international conspiracy to launder funds funnelled away from 1MDB, including funds related to the film "The Wolf of Wall Street."
That complaint said officials at 1MDB, their relatives and other associates diverted more than $3.5 billion from the state fund and laundered it through complex transactions and shell companies with bank accounts in Singapore, Switzerland, Luxembourg and the U.S.
The producer of "The Wolf of Wall Street," Red Granite Pictures, was co-founded by Riza Aziz, the stepson of Malaysia's Prime Minister Najib Razak.
Riza was named as a "relevant individual" in the complaint, but Najib wasn't named. However, media have reported, citing unnamed sources, that the complaint's 32 references to "Malaysian Official 1," who allegedly received hundreds of millions from 1MDB, were to Najib.
On Thursday, Abdul Rahman Dahlan, a senior government minister in Najib's cabinet, said that Malaysian official 1 was Najib, confirming statements he made in a BBC interview published earlier Thursday. Rahman's statement noted that Malaysian official 1 was only referred to in the civil suit, not named as a subject.
Najib has repeatedly denied wrongdoing, as have Riza and Red Granite Pictures.
In addition to the allegations of money laundering, there's another development that may complicate the Malaysia-U.S. relationship: Once the assets are seized, U.S. officials don't appear likely to return them to Malaysia, analysts said.
In any kleptocracy case, it would do no good to give assets back to people who stole them in the first place, noted Eric Berg, a former Department of Justice attorney, who previously worked with the kleptocracy initiative on money laundering.
The U.S. government was more likely to look at other options, such as deploying the funds to non-profits active in the assets' home country or find some way to invest the funds on the country's behalf, Berg, who is currently a litigation attorney at Foley & Lardner, told CNBC recently.
But he noted that "certainly implicates foreign policy."