KUALA LUMPUR (March 1): Former BSI Singapore banker Kevin Swampillai has testified in the 1Malaysia Development Bhd-Tanore (1MDB-Tanore) trial that fugitive financier Low Taek Jho, or Jho Low, had used fiduciary funds to create an “optical illusion” that monies belonging to SRC International Sdn Bhd, 1MDB and Aabar Investments PJS were invested in real investment instruments.
At the High Court here on Wednesday (March 1), he also testified that he had the impression that these transactions had been done with former prime minister Datuk Seri Najib Razak’s approval
Kevin, 58, is the former head of wealth management services at BSI Singapore.
The 44th prosecution witness testified to how Jho Low chose fiduciary fund structures in 2011 to layer money flows and obscure client identities when dealing with funds from SRC, 1MDB and Aabar.
While reading from his witness statement before judge Datuk Collin Lawrence Sequerah, Kevin testified that at the beginning of the client relationship with Jho Low, SRC, 1MDB and Aabar in 2011, he was not aware of Jho Low's motives for selecting fiduciary funds over other solutions like insurance structures and trusts.
"However with the benefit of hindsight based on the information that has come out in the public domain since 2015, it is evident to me that Jho Low intended that the fiduciary funds would be better at giving the optical illusion to various stakeholders in Malaysia and elsewhere that the funds belonging to SRC, 1MDB and Aabar were invested in bona fide investment instruments, such as investment funds,” he said.
Kevin detailed how Jho Low came to use the fiduciary funds by companies such 1MDB Global Investments Ltd (1MDBGIL), SRC, Brazen Sky Ltd and Aabar, which can be traced back to a meeting he had with Jho Low in 2011.
"I understand Jho Low had come to know about fiduciary funds and how they are used from his relationship manager Yak Yew Chee.
"Yak then asked me to conduct a presentation to Jho Low in order to explain to him the entire range of fiduciary solutions available through BSI Bank.
"This range of solutions included trusts, insurance structures as well as fiduciary funds," he said.
He testified that he can't recall the exact date of the presentation but it took place sometime in the second quarter of 2011 at St Regis Hotel, Singapore.
Kevin said besides himself, Jho Low, Yak and ex-BSI banker Yeo Jiawei were present during the presentation.
"During that presentation, Jho Low asked a number of questions regarding the inner workings of fiduciary funds.
"There were follow-up questions from Jho Low after the St Regis meeting, which were communicated through Yak, which were duly answered by either myself or Yeo," he said.
Kevin added that clients using fiduciary funds have virtually limitless flexibility to decide on the structure of transactions placed through fiduciary funds.
For example, they choose the target destinations where the monies will eventually end up.
They will decide on the instruments (such as equity shares or loans in the form of lending agreements such as promissory notes) used to optically legalise the flow of money from the fund to target companies or assets intended to be acquired.
The clients are also in control of the timing and amounts channelled through such fiduciary structures.
He testified that not long after this meeting, the SRC account was opened, followed by Aabar Investment PJS Ltd and Brazen Sky in 2012, and 1MDBGIL in 2013.
"The use of fiduciary funds was prevalent in all of these accounts without exception. The common denominator prevalent in all these accounts or companies was the presence of Jho Low and the fact that all these companies came under the auspices of the Ministry of Finance Malaysia (MOF)," he said.
Kevin then testified that after using this modus operandi, Jho Low had also used the fiduciary funds method for his other shell companies such as Cistenique Investment Fund, Enterprise Emerging Market Fund (EEMF), Devonshire Capital Growth Fund, Bridge Absolute Return Fund and others.
“Each of these funds were domiciled in offshore fund jurisdictions which are widely considered to be 'light' in terms of regulatory oversight and control," he said.
He added that Cistenique and EEMF are domiciled in Curacao in the Caribbean region while Devonshire and Bridge were domiciled in the British Virgin Islands (BVI) and Cayman Islands.
"Each of these funds were managed and administered by third-party fund managers, but in all transactions undertaken by Aabar BVI, 1MDB, SRC in these funds, the investments and structure thereof was determined by the client," he said.
He said in the case of the fiduciary funds used by Aabar, SRC and 1MDB, the monies transferred to these funds were not placed on fiduciary deposit.
"... rather they were conduits to channel monies to various beneficiaries known only to the clients themselves whilst at the same time obscuring the intentions of the client from scrutiny by various stakeholders in Malaysia," he said.
Kevin then testified that the fiduciary fund transactions and instructions to implement the transactions were conveyed to Yak by various 1MDB, SRC and other related companies. Yak was the relationship manager.
"I was always under the impression that these transactions were undertaken with the knowledge of the then prime minister, Najib Razak," Kevin testified.
The witness said he had that impression because SRC was a company owned by MOF at the time when Najib was its minister, and he was also the chairman of 1MDB's board of advisers.
Furthermore, 1MDB was wholly owned by MOF, and Jho Low had also made "various intimations" to BSI Bank that he was an adviser to Najib, which was communicated to Kevin by his superiors and Yak.
"In the face of persistent questions by BSI Bank on the final destination and use of funds channelled through the fiduciary funds, Jho Low's consistent response was that these transactions were highly confidential government-to-government investments, and therefore no further information could be made available," he added.
Kevin also said that because of the magnitude of transactions, an apex approval was needed by some highly placed source in the government.
"Finally, the size of these transactions were of such a high magnitude and frequency that they had to have some kind of apex approval such as that issued by a highly placed government official such as a prime minister,” he said.
Najib is on trial on four counts of abuse of power and 21 counts of money laundering involving RM2.28 billion of 1MDB funds.
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