Malaysia's central bank fines troubled state fund 1MDB

1MDB has been fined by Malaysia's central bank for failing to comply with bank rules.
1MDB has been fined by Malaysia's central bank for failing to comply with bank rules.PHOTO: AFP

KUALA LUMPUR (REUTERS/AFP) - Malaysia's central bank said on Thursday (April 28) that it has fined troubled state fund 1Malaysia Development Berhad (1MDB) for failing to comply with bank rules.

It did not specify the amount that 1MDB had to pay.

Bank Negara Malaysia said 1MDB had to repatriate funds remitted abroad after the central bank revoked three permissions it had granted for the fund transfers.

The statement said 1MDB failed to submit evidence to justify its inability to comply with the repatriation order, and has until May 30 to pay the fine which would mark the end of central bank's investigations.

Central bank governor Zeti Akhtar Aziz said in March that it would pursue administrative action on 1MDB, after it missed a deadline to submit documents on its finances abroad.

The bank has been pressuring 1MDB over US$1.83 billion that the company has said was previously remitted abroad.


Bank Negara has said the company failed to prove the ultimate use of the money or comply with previous instructions to repatriate the $1.83 billion.

The bank's order requires "1MDB to repatriate monies remitted abroad", it said, adding that the company has "failed to submit evidence and documentation specified by the bank to justify its inability to fully comply with the repatriation order".

No 1MDB response was immediately seen.

The fund, founded in 2009 by Prime Minister Najib Razak, is teetering on the brink of collapse amid multiple investigations around the world into allegations that billions were looted from it.

Datuk Seri Najib also has been under pressure over US$681 million that he received from overseas in 2013.

1MDB, whose advisory board is chaired by Mr Najib, earlier this week defaulted on a US$1.75 billion bond issue after missing a US$50 million interest payment, triggering fears that the government will have to step in and bail out 1MDB, which could rattle markets and hurt Malaysia's credit rating.

1MDB, which ran up more than US$11 billion in debt in a series of much-questioned investments, has steadfastly denied money was stolen or that it was in financial trouble. But earlier this month a Malaysian parliamentary committee said at least US$4.2 billion in questionable overseas money transfers were made by 1MDB.

Mr Najib was plunged into the crisis last year when the Wall Street Journal revealed that US$681 million in transfers to his personal bank accounts. He claims the money was a gift from the Saudi royal family, most of which he returned. A Saudi official recently said that was true, but only after weeks of silence that cast doubt on the claim.

In a series of more recent investigative reports, however, the newspaper said Malaysian investigation documents indicate more than US$1 billion in 1MDB-linked money had been funnelled to Mr Najib. Mr Najib and 1MDB vehemently deny that claim.

Mr Najib has faced calls to resign, but he has tightened his grip on the ruling party and thwarted domestic investigations. His position is not seen as under imminent threat.

Here is the Bank Negara statement in full:

Following receipt of the consent of the Attorney General today, Bank Negara Malaysia has issued a letter of administrative compound to 1MDB for failure to fully comply with directions issued under the Financial Services Act 2013. This includes requirement for 1MDB to repatriate monies remitted abroad following the revocations of the three permissions granted by Bank Negara Malaysia to 1MDB in 2009, 2010 and 2011. 1MDB has also failed to submit evidence and documentation specified by the Bank to justify its inability to fully comply with the repatriation order. 1MDB has been given until 30 May 2016 to pay the compound. The payment of the compound marks the conclusion of the investigation by Bank Negara Malaysia on the contraventions to the rules and regulations of the Central Bank.