from the economist.com:~~~~~

The 1MDB affair

Turning the screw

Investigators focus on the mystery of the missing billion

AS IF being investigated by seven countries wasn’t enough, 1MDB is also flirting with default. Government gumshoes in Switzerland, America and elsewhere are said to be close to mapping the full money trail in a suspected multi-billion-dollar scam centred on the heavily indebted Malaysian state investment fund. As their probes intensify, 1MDB’s relationship with a big backer is unravelling: IPIC, an Abu Dhabi sovereign fund, has declared 1MDB to be in breach of an important financial contract between the two—and has duly terminated it. The move complicates an already tricky debt restructuring at 1MDB. It also fans the flames of a scandal that touches the upper reaches of Malaysian politics and international finance.
IPIC bailed out 1MDB last year with a $1 billion loan and an agreement to take responsibility for interest payments on some of 1MDB’s bonds; in return 1MDB was to transfer undisclosed assets to IPIC. But on April 18th the Gulf fund said 1MDB was “in default” on the deal, and stopped making payments to bondholders, including $50m due this week. That kicked off a five-day grace period. 1MDB says it has “ample liquidity” to cover the obligations.

The reason for IPIC’s ire is $1.1 billion that appears to have gone missing. 1MDB was supposed to transfer this to IPIC as part of their deal, but IPIC says it was never received. Investigators believe this was part of a larger sum—perhaps $3.5 billion—that was siphoned off from 1MDB to a shell company in the British Virgin Islands which had an almost identical name to one of IPIC’s subsidiaries, Aabar, but was unconnected to it.
Investigators think some of the diverted money ended up in the personal bank accounts of Najib Razak, Malaysia’s prime minister (pictured). Bank records seen by the Wall Street Journal show that $15m was spent on personal items such as jewellery, with a larger amount funnelled into the ruling coalition’s 2013 election campaign. Mr Najib denies ever having taken public money for personal gain. Malaysia’s attorney-general says a $681m payment into the prime minister’s accounts was a legal personal donation from a Saudi royal.
The investigators believe much of the cash that flowed into Mr Najib’s accounts came via an offshore firm whose beneficial owner was a business partner of a Malaysian financier called Jho Low, a member of Mr Najib’s inner circle at the time, according to the Wall Street Journal. Mr Low is thought to have played a key role in the transfers. He has denied wrongdoing.
Some $150m is also believed to have flowed from 1MDB to Red Granite Pictures, a film-production firm co-founded by Mr Najib’s stepson. This outfit subsequently financed “The Wolf of Wall Street”, a Hollywood film about a hedonistic crook. Red Granite denies wrongdoing. Mr Najib’s younger brother may also be caught up in the affair: Nazir Razak has taken a voluntary leave of absence from CIMB, the Malaysian bank he chairs, while a review is conducted into a $7m transfer into his personal account from the prime minister.
Investigations within Malaysia have been timid or stymied. Last year the attorney-general was replaced—supposedly on health grounds, though leaked documents appear to show he was about to bring criminal charges against Mr Najib. His successor has rebuffed calls by the central bank for 1MDB to face charges. A parliamentary report into the fund’s affairs identified irregularities but stopped short of alleging outright fraud.
That leaves other countries to make the running. On April 12th the Swiss said the scope of their enquiries was widening, and that they were now investigating two former public officials from the United Arab Emirates—understood to be former bigwigs at IPIC and Aabar. The statement, unusually blunt for an ongoing probe, talked of suspected “embezzlement”, “criminal mismanagement”, “forgery” and “money-laundering”.
The Swiss earlier estimated the amount possibly misappropriated through 1MDB to be $4 billion. Some investigators now reckon it could be as much as $6 billion. Switzerland’s top financial regulator calls it a “clear” case of corruption, with “concrete indications” of “inadequate” anti-money-laundering measures by banks that handled 1MDB’s cash, among them some of the biggest names in finance. America’s FBI is believed to be looking at bank transactions, property deals and much else besides. With graft and dodgy offshore manoeuvres high up political agendas after the leaking of the “Panama papers”, investigators have an added incentive to dig deep. The 1MDB affair could become an important test of how the world deals with cross-border corruption.

From the print edition: Finance and economics

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The widening probe on 1MDB now includes from little known SEYCHELLES, as reported by REUTERS:~~~

World | Sun Apr 24, 2016 3:11am EDT

Exclusive: Seychelles says helping worldwide probe into Malaysia's 1MDB fund

VICTORIA | By George Thande

The Seychelles is helping an international investigation into the troubled state fund 1Malaysia Development Berhad (1MDB), the state's Financial Intelligence Unit on the Indian Ocean archipelago said.
Transactions involving 1MDB, which has piled up $11 billion in debt, are at the center of corruption and money laundering investigations in jurisdictions that include the United States, Switzerland, Singapore, Luxembourg and the United Arab Emirates.
"The Financial Intelligence Unit (FIU) has been assisting in an international investigation into allegations surrounding the strategic Malaysian fund called 1Malaysia Development Berhad (1MDB)," the FIU said in a statement emailed to Reuters.
"Detailed information relating to offshore entities registered in Seychelles and other matters were passed to the competent authorities of investigating states," it said.
The statement was sent to Reuters by Seychelles president's office on behalf of the FIU. It is the first public acknowledgement that Seychelles has joined the widening investigation into 1MDB, whose advisory board is chaired by Malaysian Prime Minister Najib Razak.
UNVERIFIED BANK ACCOUNTS
The FIU did not name any entities involved in the investigation. The nation's Financial Services Authority said a search of companies registered in Seychelles would not provide information regarding shareholders or company directors.
A Malaysian parliamentary investigation found that $4.2 billion of 1MDB's money is unaccounted for or went to overseas bank accounts whose owners could not be ascertained.
It said about $700 million was sent without board approval to an account with private banker RBS Coutts in Geneva under the name of Good Star Ltd. The report said could not determine who owned the Good Star account. RBS Coutts has declined to comment.
In February, the Swiss attorney-general's office said it believed $4 billion had been misappropriated from Malaysian state companies. Singapore announced it had seized a "large number of bank accounts" as part of investigations into a company closely linked to 1MDB.
The Seychelles and other offshore financial centers have increasingly come under the spotlight as global leaders seek to clamp down on money laundering and the use of so-called tax havens.
The Seychelles has repeatedly said it works to ensure the archipelago is not a jurisdiction where money laundering or other illegal activities are allowed to go undetected.
(Additional reporting and writing by Edmund Blair in Nairobi.; Editing by Bill Tarrant)

My Anthem

Sunday, April 24, 2016

The 1MDB affair could become an important test of how the world deals with Cross-Border Corruption.