You know things are progressing in the world of anti-corruption enforcement when the Swiss are bringing up matters for international scrutiny. Last week the Swiss government announced that it had found improprieties in the conduct of the Malaysian government’s sovereign wealth fund, 1Malyasia Development Berhad or 1MBD for short. What was most remarkable was the timing of the announcement as the Malaysian government announced it had found nothing untowards and was closing down its inquiry the previous week.
The problem for the government of Malaysia is that the sovereign wealth fund is headed by the country’s Prime Minister, who had over $700 million deposited in a personal account. The source of the money has been questioned. The PM said this money was a personal gift from prior King of Saudi Arabia, who is now deceased. The PM further claimed he had returned all but $60 million of the donation. Most interestingly the government of Saudi Arabia said it had no record of any such gift.
However as reported in the New York Times, the Swiss government “said that $4 billion was believed to have been misappropriated and that some of that money was transferred into bank accounts held by former Malaysian public officials and current and former public officials in the United Arab Emirates.” The article reported that Swiss officials are looking into some joint ventures between the countries as well as some JVs between private companies and 1MBD.
Given the political nature of the claims inside Malaysia, it is probably not too surprising the investigation found no evidence of any wrongdoing. However, with this latest announcement from Swiss authorities; things may not bode as well for the PM or any other individuals identified by Swiss investigators.
The Swiss announcement also points towards the larger issue around the global fight against corruption. If corrupt governments cannot escape scrutiny in this former haven of banking secrecy, it will be a huge step forward. It may also mean any such corrupt governments will move to another known tax haven or money-laundering destination.