Swiss suspect Ponzi scheme used to conceal 1MDB losses
Switzerland steps up pressure on Malaysia over corruption allegations
Switzerland has stepped up pressure on Malaysia over corruption allegations linked to the 1MDB state investment fund, saying it suspected a Ponzi scheme had been used to conceal “substantial amounts” of misappropriated funds.
The Swiss attorney-general’s office said on Wednesday that its criminal inquiries relating to 1MDB had identified further suspect transactions involving the Swiss financial sector, including $800m misappropriated from investments in natural resources made by a 1MDB subsidiary, SRC.
The Swiss statement said: “It is suspected that a Ponzi scheme fraud was committed to conceal the misappropriations from both the SRC fund and from 1MDB.”
The accusations of a Ponzi scheme — a fraud in which funds generated from subsequent investors, rather than revenue, is used to pay initial investors — will fuel concerns over the governance of 1MDB, which was set up by the Malaysian prime minister Najib Razak.
Both Mr Najib and 1MDB deny any wrongdoing. The Malaysian parliament’s public accounts committee said in April that billions of dollars in transactions by the fund had not been accounted for. By January this year 1MDB’s debts ballooned from 5bn Malaysian ringgit to 50bn ($13bn).
In an apparent rebuke to Malaysian authorities, Swiss officials said that a request for assistance made to Kuala Lumpur in January was “still pending” and added that they had now requested “further mutual legal assistance” from Malaysia over the affair.
The Swiss attorney-general’s office said it “remains confident that the two requests for mutual legal assistance made to the authorities in Malaysia will be executed”.
The latest Swiss intervention shows how pressure from global regulators is intensifying, after US authorities moved to seize $1bn in assets — including properties in New York and Beverly Hills — as part of an investigation into 1MDB.
But domestically, inquiries into the affair have ground to a standstill. Malaysia’s previous attorney-general, Abdul Gani Patail, was suddenly retired on grounds of ill health last year, part of a series of moves which blunted criticism over 1MDB.
Malaysia’s new attorney-general, Mohamed Apandi Ali, has cleared the prime minister of wrongdoing over $681m paid into Mr Najib’s personal bank account, a transfer which Mr Apandi said was made by Saudi royals.
Separately, Mr Apandi halted inquiries into alleged misappropriation of funds at SRC.
A Swiss criminal investigation into 1MDB has found that about $4bn has been misappropriated from Malaysian state companies, funds which would have been earmarked for economic and social development projects in Malaysia, according to a statement in January.
Singapore has been co-operating with Swiss authorities in relation to the criminal inquiry.
In May, authorities in Switzerland and Singapore carried out apparently co-ordinated action against Swiss private bank BSI, accusing it of serious anti-money-laundering failures connected to the 1MDB affair.
The Swiss launched criminal proceedings against BSI while Singapore ordered the closure of its operations there.