This article first appeared in Forum, The Edge Malaysia Weekly on February 17, 2025 - February 23, 2025

One of the major actions that led to the uncovering of the 1Malaysia Development Bhd (1MDB) financial scandal was the investigative work carried out by the US Department of Justice (DoJ).

The enforcement agency, armed with the Foreign Corrupt Practices Act (FCPA) and the Kleptocracy Act, charged people connected to the crime and seized the assets of the perpetrators. It tracked down the illicit flow of funds right down to their respective accounts.

Among those exposed were disgraced former prime minister Datuk Seri Najib Razak and his co-conspirator, Low Taek Jho, better known as Jho Low.

Until July 2016, a large number of Malaysians, especially those from his party Umno, were in a state of denial about the considerable sums of money that had already been siphoned out of 1MDB. This was despite warnings from executives in the financial services industry of the opaque dealings of 1MDB even as early as 2011.

By 2015, news had broken that the bulk of the first RM5 billion raised by the fund had already been transferred to a company owned by Jho Low. The Edge and the news website, Sarawak Report, were among the first to break the news of the massive financial shenanigans at 1MDB, thanks to information provided by Xavier Justo, a former employee of PetroSaudi.

However, Najib used his powers to remove the dissenters, including disbanding a high-level task force formed to investigate 1MDB and sacked ministers who were vocal against him and 1MDB. He let loose the government propaganda machine at full throttle, denying that 1MDB’s money, raised using government guarantees, was already siphoned off.

Chief among Najib’s advocates was former attorney-general Tan Sri Mohamed Apandi Ali, who gave 1MDB the all-clear in October 2015.

The turning point for those who spoke out against 1MDB came in July 2016.

US Attorney-General Lorreta Lynch held a press conference on the financial scandal at 1MDB, from which funds to the tune of US$1 billion were missing. Lynch’s disclosure was just the dose of legitimacy needed to show that 1MDB had suffered a grand theft of funds that were raised through Malaysian government guarantees.

In December 2017, the DoJ delivered another blow to the attempts to hide 1MDB’s problems. The then US attorney-general Jeffrey Session disclosed that more than US$4.5 billion had been siphoned out of 1MDB through a web of transactions routed through several countries.

In 2018, Najib lost the general election and the rest is history.

Without the efforts of the DoJ, which had a team working to trace the money flows from 1MDB, Malaysians by and large would not have believed the depths to which the 1MDB scandal had sunk in 2016. The information provided by the DoJ helped prove the case against Najib who still faces three more charges related to 1MDB.

The exchange of information resulted in the US imposing a fine of US$1.6 billion on Goldman Sachs for its role in allowing the diversion of a substantial portion of the US$6.5 billion raised by 1MDB.

Unfortunately, apart from Najib, no one else has faced the music for the financial fraud at 1MDB that has been described as “kleptocracy at its worst”. There is no prosecution record against other executives linked to the1MDB scandal in Malaysia.

Other countries such as Singapore and the United Arab Emirates have jailed bankers and officials involved in the 1MDB scandal, but in Malaysia, Najib is the only person in prison. In the US, the FCPA was used to come down on Goldman Sachs and a few individuals who had benefited from the grand theft of funds from 1MDB.

The US Attorney-General’s office is shutting down the kleptocracy desk and pausing all action under the FCPA. The Trump administration contends that US companies were not gaining strategic investments in areas such as mining, deep water ports and other key infrastructure because they were not able to do what were “routine business practices in other nations”.

Effectively, the message is that the corruption of officials is deemed acceptable in foreign countries and that American businesses are not able to gain a competitive advantage because they will face prosecution if bribes are paid.

The US was at the forefront of fighting corruption on the international platform. All transactions involving US dollars were tracked down by the DoJ and the Federal Bureau of Investigation. The FCPA had come into force in 1977, and one of the first US companies to face sanctions under the law was defence industry manufacturer Lockheed.

Since then, many other countries have come up with laws against corruption. But the utter lack of zeal to implement the law without fear or favour here is disappointing.

For instance, the alleged corruption case involving several state assemblymen in Sabah who are aligned with Gabungan Rakyat Sabah has been ongoing for months without any outcome. Several videos have surfaced of a businessman seeking the return of money that was passed on to the state assemblymen for mining prospecting licences that were eventually not approved.

Malaysian Anti-Corruption Commission chief Tan Sri Azam Baki had said the commission would come up with a full explanation on the matter by the end of February. But this has not gone down well, especially with MPs from DAP.

To compound matters, Datuk Seri Anwar Ibrahim’s government has come under fire for its stagnant ranking in the Corruption Perceptions Index. Among the reasons for Malaysia’s uninspiring performance in the last two years is the lack of information on why several high-profile cases involving politicians have been discontinued without any clear reason.

After the change of government in 2018, the Attorney-General’s Chambers used to come out with statements whenever high-profile cases were discontinued.

But that has not been the case in the last three years, raising questions about the resolve of the Anwar administration to combat corruption.

This just brings back memories of Malaysia prior to 2018 when the nation was frustrated with the 1MDB fiasco and the complete absence of accountability. That was until the DoJ acted using the FCPA and Kleptocracy Act.

M Shanmugam (m.shanmugam@bizedge.com) is a contributing editor at The Edge

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