4. TheCASE
4
2012 -
2013
May 2012 –
Mar 2013
Three bond
offerings for 1MDB
by GS, raising
approximately $6.5
billion.
2009
1Malaysia
Development Berhad
(1MDB) Launched
4
Warnings and Red Flags Ignored
5. 5
RedFlags
1. Excessive Fees and Profits: Goldman Sachs earned unusually high fees from the bond issuances—
about $600 million from $6.5 billion raised. This amount was far above the standard banking fees and
should have prompted an internal review of the deals’ appropriateness and integrity.
2. Warnings from Compliance Department: Goldman’s own compliance officers raised concerns about
the associates involved with 1MDB, particularly Jho Low, who was seen as a high risk due to unclear
sources of wealth and potential connections to money laundering activities.
3. Internal Concerns Over 1MDB’s Management and Business Plans: Several Goldman executives and
personnel voiced concerns about the lack of experience and capabilities of 1MDB’s management in
handling projects of such significant scale and complexity.
4. Political Exposure and Corruption Risks: The close ties between 1MDB's projects and the Malaysian
Prime Minister Najib Razak, along with the political nature of 1MDB’s intended projects, were clear
indicators of high corruption risk, which typically warrant heightened scrutiny.
6. 6
RedFlags
5. Ignoring of Internal and External Warnings: Despite multiple internal warnings and public accusations
of corruption linked to 1MDB and its associates, Goldman Sachs proceeded with the bond issues.
These actions indicated a possible neglect of standard due diligence processes.
6. Quick Misappropriation of Funds: A large portion of the funds raised through bond offerings was
quickly misappropriated, indicating that the funds were not used for their intended purposes. This
rapid diversion of funds was a direct consequence of ignoring the initial red flags.
7. Legal and Regulatory Warnings: The involvement of 1MDB in transactions and financial arrangements
that were flagged by regulatory bodies in multiple countries should have served as a caution to
Goldman Sachs about the legitimacy of the deals.
8. Unusual Transaction Structures: The structuring of the bond deals, their non-competitive placement,
and the involvement of obscure offshore entities were all atypical of standard sovereign wealth fund
operations and added layers of unnecessary complexity and secrecy.
7. TheCASE
7
2012 -
2013
May 2012 –
Mar 2013
Three bond
offerings for 1MDB
by GS, raising
approximately $6.5
billion.
Public Exposure
The scandal gains public
attention with media reports
outlining the misappropriation of
funds from 1MDB.
2009
1Malaysia
Development Berhad
(1MDB) Launched
2014 2015
7
Warnings and Red Flags Ignored
Years of
investigation
End of Goldman’s Direct Involvement
8. 8
2019
Goldman Sachs’
Public Statements
maintains that only
rogue employees
were involved,
distancing the
broader organization
from the misconduct.
2018
Legal Actions Intensify
• Charges Against Former Executives
• Malaysia Files Criminal Complaint
2020 and
Beyond
8
Settlements and Ongoing Litigation
• Settlement Efforts
• Continued Investigations
TheCASE
Under the $3.9bn deal, Goldman Sachs would make
a $2.5bn cash payout and guarantee to return at
least $1.4bn in assets linked to 1MDB bonds.
In return, Kuala Lumpur agreed to end all criminal
proceedings against the bank.
10. EVIDENCEOFCGPROBLEMS
Jho Low (the faciliator) profile
ignored
1MDB profile ignored
Multiple concerns from
insiders ignored
The destination of money
ignored
The compliance system had raised concern 2
times and Jho still could meet the Chairman of
GS
2 famed auditors resigned, the 3rd auditor had
been fined, 1 investment banking firm refused
to value the asset' prices any higher
1 from a high level executive supervising Asia
and 1 from a low level employee in Hongkong
$3 billions was approved to be moved to a
small Swiss bank and even they were suspicious
of 1MDB purpose
13. Lessonslearned
BETTERMONITORING
METHODS
The scandal involves
a complex, carefully
calculated money
laundering scheme
IMPROVEDAML
REGULATIONS
All countries should
collaborate in creating a
stronger global AML
regulatory framework
STRONGERCOMPLIANCE
CULTURE
Stakeholders and
managers should not
emphasize too much on
profits while ignoring
compliance
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