BSA/AML issues raised with 1MDB transaction


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BSA/AML Compliance questioned in 1MDB transaction

The fallout from Malaysia’s 1MDB Fund continues—and Goldman Sachs Group is now in the spotlight. U.S. authorities are investigating whether Goldman Sachs should have reported a money transfer from a $3 billion bond deal as suspicious.

Myriad questions dog the Malaysian state investment fund that was ostenibly created for local Malaysian development. Vast amounts of 1MDB funds have allegedly been distributed to Prime Minister Najib Razak, his election and personal coffers, and his family members. In one of the most bizarre angles of the story, Razak’s stepson apparently funded much of the budget of the Hollywood film “Wolf of Wall Street” with 1MDB money explicitly raised for development projects in Malaysia itself.

These various questionable redirections of 1MDB funds are where the Goldman investigation gets traction. A Wall Street Journal report last week described how the proceeds from the $3 billion bond issue were “supposed to fund a major real-estate project in the nation’s capital that was intended to boost the country’s economy.”

However, once Goldman transferred the funds into a small and private Swiss bank account tied to the 1MDB fund, “half of the money disappeared offshore, with some later ending up in the prime minister’s bank account, according to people familiar with the matter and bank-transfer information viewed by The Wall Street Journal.”

Investigators apparently are considering whether Goldman should have flagged this transaction as suspicious as required by the Bank Secrecy Act. Questions about the transaction include the alleged irregularity of transmitting the cash proceeds to this type of Swiss bank account rather than a larger and more traditional bank for state funds of this type and size. There are also questions about the timing of the bond issue and Goldman’s longstanding relationship with this customer. Goldman has not formally been accused of wrongdoing in this matter.

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