Singapore hits Goldman Sachs with US$122m payment, warning over 1MDB scandal

Singapore

GOLDMAN Sachs Singapore has been charged by the Singapore authorities to pay US$122 million over its involvement in the 1MDB scandal.

This is part of more than US$2.9 billion to be paid as part of a coordinated resolution with criminal and civil authorities in jurisdictions including the US and Singapore, said the US Department of Justice (DOJ).

The Commercial Affairs Department (CAD) has also served Goldman Sachs Singapore with a 36-month conditional warning, in lieu of prosecution, for three counts of corruption offences punishable under the Prevention of Corruption Act.

The Monetary Authority of Singapore (MAS) directed the Singapore unit of Goldman Sachs to appoint an independent external party to conduct a review of its remedial measures, said a joint statement by the Attorney-General's Chambers, Singapore (AGC), CAD, and MAS that was issued early Friday morning.

In a separate statement on Friday night, MAS clarified that the US$122 million payment is not a fine, which can only be imposed by the courts, but a payment following the conditional warning that was administered by CAD to Goldman Sachs Singapore on Oct 22, 2020.

The sum of US$122 million is the largest payment made by any financial institution to the Singapore government to date for a crime-related matter.

Goldman Sachs Singapore will also disgorge another sum of US$61 million to the Malaysian authorities, which will be paid in accordance with the deferred prosecution agreement that the banking group has entered with the DOJ. It will as well continue to cooperate with CAD in its 1MDB-related investigations, the regulators said.

The Wall Street giant agreed with the DOJ and other regulators to accepting fault in underwriting bond offerings that raised US$6.5 billion for the Malaysian state fund.

DOJ said Goldman Sachs has admitted to conspiring to violate the Foreign Corrupt Practices Act (FCPA), in connection with a scheme to pay over US$1 billion in bribes to Malaysian and Abu Dhabi officials to obtain "lucrative business" for Goldman Sachs.

Over in Hong Kong, the financial regulator on Thursday slapped the Wall Street bank's local subsidiary with a record US$350 million fine.

This was amid "serious lapses and deficiencies in its management supervisory, risk, compliance and anti-money-laundering controls" that contributed to the misappropriation of US$2.6 billion from money that 1MDB raised in three bond offerings in 2012 and 2013, Hong Kong's Securities and Futures Commission (SFC) said.

Goldman Sachs Asia, the compliance and control hub of Goldman Sachs in Asia and that is based in Hong Kong, had received 37 per cent of the total revenue of US$567 million generated from the bond offerings, or US$210 million. This was the largest share among the various Goldman Sachs entities, SFC said.

Tim Leissner, the former head of Goldman's Southeast Asia business, pleaded guilty in 2018 to criminal charges brought by the DOJ against him for conspiring to commit money laundering and to violate the FCPA.

"The SFC's investigation found that Leissner was essentially given a free rein in the execution of the 1MDB bond offerings, enabling him to provide misleading information to - or conceal information from - Goldman Sachs without being adequately challenged," said the SFC.

DOJ said Goldman Sachs also admitted that, although employees serving as part of Goldman's control functions knew that any transaction involving Malaysian financier Jho Low posed a significant risk, and although they were on notice that Low was involved in the transactions, they did not take reasonable steps to ensure that Low was not involved.

Low, who has been indicted for conspiracy to commit money laundering and to violate the FCPA, remains a fugitive.

Goldman Sachs Malaysia has pleaded guilty to DOJ charges over its role in the 1MDB scandal. The Wall Street Journal reported this week that the 1MDB scandal will cost Goldman Sachs more than US$5 billion to resolve, translating to about two-thirds of a year's earnings.

Separately, MAS has banned Kevin Michael Swampillai, the former head of the wealth management services department of BSI Bank Singapore, permanently from any regulated activity tied to securities dealing and financial advisory under the lifetime prohibition orders (PO) that took effect on Thursday.

From 2012 to 2013, Mr Swampillai and his then-subordinate, Yeo Jiawei, had assisted 1MDB to restructure several of its joint venture interests.

In that time, Mr Swampillai and Mr Yeo channelled about US$5 million as a portion of the fund management fees, to an entity beneficially owned by Mr Swampillai, without the bank's knowledge and authorisation.

MAS said Mr Swampillai also deliberately tried to "improperly influence" the outcome of an audit carried out by them on 1MDB's fiduciary fund investments. He misrepresented to 1MDB's auditors that the assets held by PetroSaudi Oil Services Limited, one of 1MDB's investments, were "mostly cash", when he knew that the assets were two drill ships.