Tuesday, March 14, 2017
In 2016, the department filed the largest single action ever brought by the Kleptocracy Initiative, marking a significant milestone in the department’s ongoing fight against global corruption, involving two bond offerings in 2012 through which 1Malaysia Development Berhad (1MDB) raised money that was siphoned off by the corrupt officials and their associates.
The stated purpose of the 2012 bond offerings was to allow 1MDB to invest, for the benefit of the Malaysian government, in certain energy assets. But almost immediately after receiving the proceeds of these two bond issues, roughly 40 percent of the funds raised –approximately $1.37 billion – was transferred out of 1MDB’s accounts. The money went into the Swiss bank account of a shell company incorporated in the British Virgin Islands. The complaint alleges that the name of this shell company was intended to suggest an affiliation with a legitimate company involved in the bond offering but, in fact, the Swiss bank account was controlled by corrupt officials.
This case is yet another example of what happens when individuals and criminal organizations are able to use shell companies to move, and ultimately conceal, the proceeds of crime and kleptocracy. Gaps in the legal regimes across the globe – including, as I have already noted, here in the United States – allowed these criminals to avoid disclosing the ultimate beneficial owners of the accounts to which 1MDB funds were diverted. The significant assistance we received from our international partners was critical in identifying and restraining assets in this case.