SINGAPORE (BLOOMBERG) - As Malaysia's most powerful man, Najib Razak worked hard to keep the public from accessing information about a multi-billion dollar scandal at state fund 1MDB. Now they just might find out all the juicy details.
Only three days after 92-year-old Mahathir Mohamad secured a shocking election win, he barred Najib from leaving Malaysia and said he'd reopen a graft probe targeting the fund. He also said he was replacing the attorney-general who cleared Najib and instructed the auditor-general to declassify a 1MDB report that was protected by the Official Secrets Act.
It's a stunning turn of events for Najib, who has long denied any wrongdoing and aggressively hit back at detractors after 2015 revelations that around US$700 million (S$932.8 million) - alleged to be 1MDB funds - appeared in his personal accounts before the prior election in 2013. Najib had fired his top prosecutor, expelled four cabinet ministers who defied him, filed defamation lawsuits and blocked websites of critical news outlets.
A revitalized probe would reverberate around the world, with investigations ongoing in a number of countries. The US has alleged the fund's officials laundered more than US$4.5 billion through a complex web of opaque transactions and fraudulent shell companies located from Switzerland to Singapore to the US - a scheme US Attorney General Jeff Sessions in December called "kleptocracy at its worst."
Shedding light on 1MDB is only one part of Mahathir's move to root out corruption after a scandal that even Najib admitted hurt Malaysia's international reputation. Mahathir is investigating government agencies and barring all civil servants from receiving material gifts and donations.
The US Department of Justice has sought to seize about US$1.7 billion in assets it says were illegally acquired with 1MDB cash, including art, real estate, a luxury yacht and proceeds from Hollywood movie The Wolf Of Wall Street. Meanwhile Singapore and Switzerland reprimanded banks such as UBS Group and JPMorgan Chase & Co for anti-money laundering lapses.
"If there are any fresh transactions uncovered, this could trigger off related money laundering criminal and civil investigations worldwide," said Nizam Ismail, head of regulatory practice at RHTLaw Taylor Wessing LLP in Singapore.
Investors were cautious after Malaysia's financial markets reopened on Monday. The FTSE Bursa Malaysia KLCI Index traded little changed as of 9:33am in Kuala Lumpur, after plunging as much as 2.7 per cent earlier, while the ringgit was down 0.9 per cent against the dollar - the most in 18 months.
The government will formulate an economic policy that restores investor confidence in Malaysia after the 1MDB scandal, Lim Guan Eng, who was named finance minister, said in a briefing on Sunday in Penang.
The latest drama unfolded on Saturday after reports emerged that Najib planned to fly to Indonesia with his wife in a private jet, prompting an angry crowd to gather at a local airport. Hours later, the immigration department said it blacklisted Najib, and Mahathir confirmed he personally placed travel restrictions on his former protege.
Najib said he'd respect the order, and apologised "for any shortcomings and mistakes." By nightfall, he had quit his position as leader of the United Malays National Organisation, which until last week had run the country since independence in 1957.
Mahathir has said his predecessor "will have to face the consequences" for any wrongdoing with 1MDB, which was first set up in 2009 to fund infrastructure projects with Najib as chairman of its advisory board. On Saturday, Mahathir said he wanted a new probe concluded "as quickly as possible."
"It is a very complex thing because it involves a lot of people, it involves a lot of decisions made, and the money you know has to be investigated as to the money laundering," he said. "We have to contact America, Switzerland, Singapore."
While assets seized by other governments could be returned quickly, it would take more time to hunt down missing funds, said Lim Chee Wee, a Malaysia lawyer and former member of the anti-corruption agency's operations review panel from 2014 to 2016.
"I am confident that through extensive and persistent investigation, it should be recoverable - albeit through the passage of time," he said.
Under that scenario, Malaysia's police, anti-corruption agency and central bank would reopen investigations and submit reports to the new attorney general, who would decide whether to bring charges against Najib. Mahathir over the weekend didn't name a candidate for the role.
In 2016, the then-attorney general cleared Najib after saying the money in his account was a "personal donation" from a Saudi royal family member, and most of it was returned. Saudi Arabia said it was a "genuine donation," without explaining the purpose of the funds.
"It's been cleared, there's been no wrongdoing - I stand by it,'' Najib said in an interview last month. "You cannot just accuse somebody of being a thief or anything unless there is evidence."
Now Najib must wait to see if any new evidence is uncovered. While he can appeal the travel ban, authorities have broad powers to keep it in place for an extended period if they can show the cases are proceeding without unreasonable delays.
The new attorney-general would have to show there was bad faith or malfeasance in the initial decision to clear Najib in order to bring charges, according to Eugene Tan, an associate professor of law at the Singapore Management University.
His advice for Najib: "To expect that earlier exonerations would be revoked, and that he can expect criminal charges and civil suits."