KUALA LUMPUR (March 1): Former BSI Singapore banker Kevin Swampillai testified at the 1Malaysia Development Bhd-Tanore (1MDB-Tanore) trial on Wednesday (March 1) that fugitive financier Low Taek Jho or Jho Low had put “tremendous pressure” on BSI bank employees to expedite cash transactions from 1MDB-related client accounts with the bank to other accounts linked to Jho Low.
Kevin, 58, is the former head of Wealth Management Services at BSI Singapore. The 44th prosecution witness in the trial, he testified to how Jho Low had heaped pressure on BSI bank over the transfers.
An example of such haste by Jho Low involved 1MDB Global Investment Ltd (1MDBGIL), a 1MDB linked company which opened a bank account with BSI Bank and parked its funds under fiduciary funds under Jho Low, before transferring the money out to bank accounts linked to him elsewhere.
Kevin then testified of how approximately US$2.721 billion had entered 1MDBGIL’s fiduciary fund account and how most of it was transferred out at the behest of Jho Low the very next day through several transactions.
Kevin testified that he was not surprised that the money had been transferred out the very next day because this had been the way 1MDB accounts were operated in BSI.
“The fact that a large number of fiduciary fund transactions, most of which took place within one day of the receipt of funds amounting to approx US$2.721 billion in 1MDBGIL’s account in BSI Bank, was not surprising to me as I observed from previous transactions involving other 1MDB related clients, that cash did not remain in their accounts for too long," 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 money 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 there was always “great haste” by the clients to “invest” the money in fiduciary funds as “quickly as possible”.
“In fact, various employees in BSI bank were put under tremendous pressure by the clients (specifically, the pressure was applied by Jho Low on Yak, who in turn pressured various departments in the bank) to expedite processes, so that the money flow from 1MDBGIL (and other 1MDB related client accounts) was transferred as quickly as possible from the BSI bank account to the account of the fiduciary fund and then on to the account of the target company,” he said.
He added that the relevant BSI staff were constantly reminded that they were handling “highly sensitive and time bound transactions” involving the state sovereign fund and that any complacency would not be tolerated by the client.
After verifying the 1MDBGIL transactions in relation to Cistenique Investment Fund (Cistenique), Enterprise Emerging Market Fund (EEMF), Devonshire Capital Growth Fund (Devonshire), Tanore Finance and Granton Property Holding Ltd, Kevin further testified that based on the structure and layering involved in the transactions, the legality of the said transactions was suspicious.
“Based on the structure and layering involved in these fiduciary fund transactions and the lack of clarity on the final destination of the monies that were channelled through these structures, I harboured suspicions as to the legality of these transactions despite the clients’ exhortations that these were “government to government” investments.
Kevin added that there was no credible reason or argument presented by the clients for the amount of layering involved in these transactions.
“There was no credible reason or argument advanced by the clients concerned for the amount of layering involved in these transactions. With the benefit of hindsight, I can safely say that there was no economic basis for these transactions, in that they were not bona fide investments that the clients attempted to portray,” he testified.
He clarified that the clients he was referring to include 1MDB, SRC International Sdn Bhd and its related companies.
In the opening statement of the trial, the prosecution had outlined that the US$2.721 billion from a purported joint venture company between 1MDB and Aabar Investments PJS (Aabar PJS) called Admic, held by both parties in equal shares, belongs to the “third phase” of the 1MDB scandal.
The purpose of the joint venture was to develop the Tun Razak Exchange, or TRX, in Kuala Lumpur. IPIC was to guarantee Aabar’s investment. The Ministry of Finance (MOF) of Malaysia, of which the accused (Najib) was the minister, guaranteed 1MDB’s investment by way of a letter of support. A loan of US$3 billion was raised for this purpose, with Goldman Sachs acting as the arranger of the loan.
The prosecution said that Najib signed a letter of support on March 14, to raise a loan through the issue of bonds by 1MDB from the Bank of New York Mellon Group in the sum of US$3 billion. On March 19, 2013, a sum of US$2.721 billion was dispersed into the account of 1MBDGIL with BSI Bank at Lugano in Switzerland through Singapore’s BSI branch. The balance went to pay the fee of Goldman Sachs.
Because Jho Low had rushed these transactions, from the US$2.721 billion, a sum of US$1,060,606,065 was paid into the account of two other fiduciary funds with BSI under Jho Low, namely Devonshire Funds Ltd and EEMF. Devonshire received US$646,464,649 in five tranches over two days, that is to say, on March 20 and 21, 2013. EEMF received US$414,141,416 in three tranches, also within two days, that is, on March 20 and 21, 2013.
Through a series of transactions between Devonshire and other companies such as Granton and Tanore Finance Corp, some US$681 million had entered former prime minister Datuk Seri Najib Razak’s personal account and it is part of the third charge against him as the accused in the trial.
Najib is on trial on four counts of abuse of power and 21 counts of money laundering involving RM2.28 billion of 1MDB funds.
The Edge is covering the trial live here.
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