NEW YORK - US investigators are trying to determine whether Goldman Sachs Group Inc. broke the law when it didn't sound an alarm about a suspicious transaction at Malaysia state investor 1MDB, the Wall Street Journal reported on Monday (June 6), citing people familiar with the investigation.
The report said the probe relate to US$3 billion ($4.07 billion) the American bank raised via a bond issue for 1MDB. Half of the money disappeared offshore days after Goldman sent the sum to 1MDB's bank account at the Singapore unit of Swiss bank BSI, with some later ending up in Malaysian Prime Minister Najib Razak's bank account, WSJ said, citing its sources and bank-transfer information.
BSI has been embroiled in probes in different jurisdictions into 1MDB. Its Singapore unit was last month shut down by the Monetary Authority of Singapore over suspicious transactions and fined S$13.3 million for 41 breaches of anti-money laundering rules including failure to conduct enhanced customer due diligence on "high risk accounts" and to monitor suspicious customer transactions.
The 1MDB money trail is being investigated in at least seven other jurisdictions including Switzerland and the United States.
US law-enforcement officials have sought to schedule interviews with Goldman executives, WSJ said. Goldman hasn't been accused of wrongdoing. The bank says it had no way of knowing how 1MDB would use the money it raised.
Investigators are focusing on whether the bank failed to comply with the US Bank Secrecy Act, which requires financial institutions to report suspicious transactions to regulators, said WSJ. It noted that the law has been used against banks for failing to report money laundering in Mexico and ignoring red flags about the operations of Ponzi scheme operator Bernard Madoff.
Proceeds from 1MDB's bond issue handled by Goldman Sachs in 2013 was supposed to fund a major real-estate project in Kuala Lumpur that was intended to boost Malaysia's economy.
One question investigators are asking, reported WSJ, is why 1MDB needed the cash so quickly for a property-development project that would take years to complete.
Investigators also are looking into questions raised by Goldman's lawyer on the deal, Kevin Wong, a Singapore-based partner with Linklaters, who sent a note to Goldman bankers alerting them to the fact the money was to be sent to a private bank, according to a person familiar with the matter.