Frankly Speaking: Is a share of the US$2.3 billion 1MDB-related fine too much to ask?

This article first appeared in The Edge Malaysia Weekly, on October 26, 2020 - November 01, 2020.
Frankly Speaking: Is a share of the US$2.3 billion 1MDB-related fine too much to ask?
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Regulators in the US, the UK, Hong Kong and Singapore are collectively getting US$2.3 billion after Goldman Sachs’ Malaysian subsidiary last Thursday pleaded guilty to a 1Malaysia Development Bhd (1MDB)-related bribery charge in a record US$2.9 billion (US$2.3 billion penalty + US$600 million forfeited fees) global settlement over its “central role” in the theft of billions from Malaysia.

Of that US$2.3 billion, about US$1 billion reportedly goes to the US Department of Justice (DoJ), US$350 million to Hong Kong’s financial regulator, £97 million (US$127 million) to the UK’s financial and banking regulators and US$122 million to Singapore authorities. Part of the money also goes to the US Securities and Exchange Commission (US$400 million), the US Federal Reserve (US$154 million) and New York’s Department of Financial Services (US$150 million).

Yet, just as Goldman Sachs should have prevented at least part of the theft of billions from the fund, there are those who reckon that the foreign regulators too should have picked up on the red flags — in particular the outsized US$600 million fees or 9.2% of the US$6.5 billion debt papers Goldman Sachs arranged for 1MDB that the bank has now agreed to disgorge, along with the payment of US$2.3 billion in fines to the various regulators.

That US$600 million fee, which made headlines before the scandal broke, was more than double the total revenue Goldman Sachs earned on 213 other bond offerings across Asia between 2011 and 2015, Hong Kong’s Securities and Futures Commission noted in its reprimand.

Malaysia will get the US$600 million forfeited fees that forms part of the US$2.9 billion global settlement — but that amount is not new money as it will be credited against the US$1.4 billion portion of Goldman Sachs’ US$3.9 billion settlement (US$2.5 billion cash + US$1.4 billion guarantees) with the Malaysian government in July.

The US DoJ helped recover and return over US$1 billion in cash and seized assets as at April this year — yet even with the US$3.9 billion settlement Malaysia reached with Goldman Sachs, it had barely recovered half of the over US$8.8 billion in cash and unidentified assets lost from 1MDB. Is it too much to ask for a share of the US$2.3 billion in fines?

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