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Malaysia fines Deloitte for failing to report 1MDB irregularities

The Securities Commission, in handing down the 2.2m ringgit fine, described the breaches as serious

Kuala Lumpur

MALAYSIA has imposed the maximum fine on Deloitte PLT for breaches related to a bond issuance by 1MDB, becoming the first auditor of the scandal-ridden state fund to face penalties.

The Securities Commission (SC) imposed a 2.2 million ringgit (S$730,000) fine on the accounting firm for failing to immediately report irregularities in a 2.4 billion ringgit Islamic bond sale that may have had material effect on 1MDB's ability to repay creditors. Deloitte was the auditor for 1MDB units Bandar Malaysia Sdn, the sukuk issuer, and 1MDB Real Estate Sdn for the financial years ended March 2015 and 2016.

"The SC finds the breaches committed by Deloitte serious in nature, as it has failed to discharge its statutory obligations," said the commission in an e-mailed statement.

The state fund, the full name of which is 1Malaysia Development Bhd, has used top auditors such as KPMG and Ernst & Young.

The fund was set up to bring in investments to the country, but has instead become the centre of worldwide investigations into possible corruption and money laundering.

Malaysia's securities regulator said Deloitte was unable to get enough evidence to determine whether the advances to 1MDB from, among others, the sukuk proceeds could be recovered, it said in the statement on Wednesday.

In addition to the two million ringgit fine, the SC imposed an additional 200,000 ringgit fine for Deloitte's failure to send copies of Bandar Malaysia's 2015 and 2016 audited financial statements to the sukuk's trustee in time.

1MDB's new management, which is overseen by the finance ministry, is also investigating the testimony given by Tan Theng Hooi, the former Malaysia head of Deloitte, Finance Minister Lim Guan Eng said in a written response to Parliament in November.

Mr Tan had defended the auditor's opinion on 1MDB's 2013 and 2014 financial accounts to Parliament's Public Accounts Committee, but this was before Deloitte said in July 2017 that its audited financial statements for those years shouldn't be relied upon.

A representative for Deloitte couldn't immediately be reached for comment. The company said in November that it was cooperating fully with the authorities on matters linked to 1MDB, in response to the probe into Mr Tan.

Deloitte Malaysia said in an e-mailed statement: "We stand by our professionalism, quality, independence and ethics in the services we provide." BLOOMBERG