By JOHN LETZING
Wall Street Journal
Oct. 6, 2016
The Swiss attorney general’s office made an initial request for assistance last January
ZURICH—Swiss authorities said they are trying to advance a probe into the alleged misappropriation of billions of dollars from a Malaysian state investment fund but haven’t yet received anticipated help from Malaysian counterparts.
Switzerland’s Office of the Attorney General said in a statement on Wednesday that its probe, begun in August last year, had uncovered an alleged “Ponzi scheme” at the fund, 1Malaysia Development Bhd., or 1MDB.
Malaysia’s attorney general said Thursday that it had not yet received the additional request for assistance from Switzerland. It didn’t mention an earlier request from January, which Swiss officials say is pending but said it was committed to international cooperation.
A spokesman for Malaysia’s attorney general couldn’t be reached Wednesday.
The 1MDB scandal is the focus of investigations in a number of countries, but Prime Minister Najib Razak, who set up the fund in 2009, has shut down probes into the matter at home.
In July, the U.S. Justice Department filed civil lawsuits to seize assets, including property in Los Angeles and New York, that it said was purchased with some of the $3.5 billion allegedly misappropriated from 1MDB. Swiss prosecutors have been cooperating with the U.S. authorities, as well as investigators in Singapore, Luxembourg and other jurisdictions where money allegedly flowed.
But Malaysia hasn’t cooperated, Swiss authorities say. Last summer, Mr. Najib fired Malaysia’s previous attorney general, who was leading an investigation into 1MDB. The Wall Street Journal has reported that the new attorney general subsequently declined to act on advice from the country’s central bank to open a criminal case against the fund’s management over missing investments, citing insufficient evidence.
Global investigators believe that more than $1 billion originating from 1MDB landed in Mr. Najib’s bank accounts, the Journal has reported. Mr. Najib has denied any wrongdoing. 1MDB has denied wrongdoing and has said it is cooperating with authorities. The Malaysian attorney general said part of the money that entered the prime minister’s accounts was a legal donation from Saudi Arabia, and that most of the money was returned.
The Swiss authorities said Wednesday it appears that $800 million has been misappropriated from investments made by SRC International, a unit of Malaysia’s finance ministry that formerly was part of 1MDB, and that a “Ponzi scheme” may have helped to conceal the misappropriation of funds from both SRC and 1MDB.
The Wall Street Journal previously has reported that SRC International allegedly sent about $14 million to Mr. Najib’s bank accounts in 2014 and 2015, via a company that did corporate social-responsibility work for 1MDB, according to a Malaysia government investigation. Malaysia’s attorney general earlier this year said Mr. Najib wasn’t aware of, and had not approved, the transfer of money from SRC to his accounts.
The aim of the latest Swiss request of Malaysia is to “obtain further evidence in corroboration of the latest findings,” the Swiss attorney general’s office said. One bank and four individuals are under investigation as part of the 1MDB probe, the office said, without giving details.
The Swiss attorney general’s office has previously disclosed that it opened a criminal probe of Switzerland-based bank BSI SA, which allegedly handled scores of transactions involving 1MDB funds. Last January, the office said it had found that billions of dollars may have been misappropriated from state-owned companies in Malaysia, with some of it transferred to Swiss bank accounts.
Singapore’s central bank ordered the local arm of BSI to shut down operations last May, and fined it nearly $10 million for breaching money-laundering regulations.
The Wall Street Journal has reported previously that investigators believe much of the money allegedly siphoned from 1MDB was funneled through BSI in Singapore. Switzerland’s financial regulator, Finma, has said BSI failed to adequately monitor its relationships with clients who had ties to 1MDB, though BSI has appealed that ruling.
BSI has acknowledged “internal shortcomings in the past” but has said all of its client relationships related to 1MDB were closed early last year. EFG International, a Zurich-based bank, is in the process of acquiring BSI.
—Tom Wright contributed to this article.