The Man From FCPA continues to be amazed at how the scandal surrounding the Malaysian sovereign wealth fund 1MDB roils throughout the financial world and beyond. The International Business Times reported that the Monetary Authority of Singapore (MAS) has issued a proposed ban on the former top dealmaker for Goldman Sachs in southeast Asia, Tim Leissner, for his role in the scandal.
Leissner was the Goldman Sachs client relationship manager for 1MDB and headed up three major bond issuances raising over $6bn for the wealth fund. The final bond issuance was in 2013, raising $3bn million for 1MDB and earning Goldman Sachs a fee of $300 million. Swiss authorities have alleged the up to $4.8bn of this total amount was diverted from companies linked to 1MDB.
It was not these activities, however, that caused the MAS to act to ban Leissner. It was his issuance of an unauthorized letter, sent on Goldman Sachs letterhead, providing a reference to a financial institution in Luxemburg for a person who has become associated with the scandal, Mr. Jho Low. The letter attested that Goldman Sachs had performed due diligence on Mr. Low and no red flags appeared in his background. According to the MAS, “These statements were untrue and were made by Mr Leissner with Goldman’s knowledge or consent.”
For the compliance practitioner, this matter brings up a clear red flag around due diligence, that being a reference provided by a third party to vouch for that third party. This is essentially a self-certification that there are no red flags present. This example can be added to those which arose from Unaoil and companies in the Panama Papers affair for the very teachable moment that self-certifications can be worse than useless if there is no follow-up or additional background investigation going forward. It means that while due diligence is one part of managing a third-party relationship, whether in an anti-bribery/anti-corruption compliance program or in an anti-money laundering compliance program, there must be the actual doing of compliance to fulfil the five-step process of the lifecycle management of third parties.
1MDB continues to provide revelations and one can only assume the scandal will continue to reverberate in 2017.