KUALA LUMPUR (BLOOMBERG) - Malaysia may attend the US Department of Justice's proceedings in a civil suit to seize more than US$1 billion (S$ 1.3 billion) in assets that the latter said was illegally acquired with money diverted from an embattled Malaysian development fund, the Star reported.

Attorney General Mohamed Apandi Ali said he is contemplating holding a so-called watching brief to "register our interests" because 1Malaysia Development Bhd is a Malaysian company and the government has an interest, the Star newspaper reported on Monday (Aug 1).

The Malaysian government did not need to get involved because it was a private matter between US authorities and four defendants named in the suit, the Star earlier reported citing Azalina Othman Said, a minister in the Prime Minister's Department.

A spokesman for the attorney general's office could not immediately respond to a request for confirmation of the prosecutor's remarks, while calls to Azalina's office after working hours were not answered.

The Malaysian fund is at the center of several international investigations into alleged corruption and money laundering by public officials. Prosecutors in at least four countries - Singapore, Switzerland, Luxembourg and the US - are looking into money flows from the investment vehicle.

US prosecutors last month detailed an alleged scheme of international money laundering and misappropriation stretching from 2009 to 2015 and announced it is seeking to seize more than US$1 billion worth of assets it says went through US banks.

Separately, an arbitration case between 1MDB and an Abu Dhabi sovereign fund over a multi-billion dollar debt dispute will be heard next month as the parties seek an end to a months- long spat, Second Finance Minister Johari Abdul Ghani told reporters on Monday.

Malaysian records showed that 1MDB dealt with a unit of International Petroleum Investment Co. PJSC, Johari said. IPIC has denied ownership of Aabar Investments PJS Limited or Aabar BVI, to which 1MDB said it sent US$3.5 billion.

IPIC is seeking US$6.5 billion from the troubled Malaysian company as the two remain locked in a tussle that spilled over to repayments on bonds issued by 1MDB. That led the fund to default in April, adding to the financial scandals it is facing. 1MDB has denied wrongdoing.

IPIC, which had guaranteed two sets of 1MDB debt, made payments after the Malaysian fund missed them in April and May.

"We take the position we are not paying the interest," Johari said. "We must win the case."

Investigators probing 1MDB are faced with a complex web of transactions, some of which involve companies with similar names. 1MDB has said it negotiated "various legal agreements" with the previous heads of IPIC and Aabar, and called it a "surprising claim" that neither Gulf company knew of its dealings with Aabar BVI.

Johari reiterated on Monday that 1MDB dealt with Aabar BVI and not "individuals," without specifying who he was referring to.

He also said that 1MDB no longer has exposure to local banks, limiting the implications on the financial system.