Malaysia Attorney General, Central Bank Spat Escalates Over Fund

  • A-G rejected requests for criminal proceedings against 1MDB
  • Tensions rise before parliament's resumption next week

A dispute between Malaysia’s attorney general and central bank over investigations into a debt-ridden state investment company has become increasingly public, highlighting tensions over the matter ahead of the resumption of the country’s parliament.

Both camps have defended their actions in relation to the fund, which is at the center of overlapping probes amid allegations of financial irregularities. The fund’s advisory board is chaired by Prime Minister Najib Razak, who has faced a funding scandal over money that showed up in his personal bank accounts before the last election in 2013.

1Malaysia Development Bhd. provided all the information that Bank Negara Malaysia requested related to approvals on three overseas remittances between 2009 and 2011, and permissions were given within three days, Attorney General Mohamed Apandi Ali told reporters on Tuesday. His office has dismissed the central bank’s requests for criminal proceedings against 1MDB for allegedly breaching the Exchange Control Act.

The central bank said this month it’s revoking three permissions given to 1MDB for investments abroad totaling $1.83 billion, and instructed it to repatriate the amount. Bank Negara had to act against the fund to protect the integrity of the financial system, Governor Zeti Akhtar Aziz, who has led Bank Negara for more than 15 years, said in an interview Sunday.

Requested Information

"As far as 1MDB is concerned it needs to fill up the relevant form and respond to the queries by Bank Negara Malaysia," the attorney general said. "If Bank Negara Malaysia does not request for certain or specific information how could 1MDB be faulted as it has filled up the form as required and responded to the queries made?"

Political tensions may rise over the imbroglio surrounding 1MDB and Najib with the resumption next week of parliament, while Najib will hand down his latest budget on Oct. 23. Former premier Mahathir Mohamad and Najib’s former deputy Muhyiddin Yassin appeared at a press conference on Monday where Mahathir again called on Najib to step down. He has also urged parliament to call a vote of no confidence against him.

Najib has retained the backing of other senior officials in his ruling party after the Wall Street Journal reported in July that $700 million may have moved through government agencies and state-linked firms before ending up in accounts bearing his name. The anti-corruption commission and Najib said the money was from donors in the Middle East, not 1MDB, and Najib denied any wrongdoing. The accounts have since been closed.

State Rulers

The public to-and-fro between the organizations came after sultans and other state rulers said investigations into 1MDB must be completed as soon as possible to resolve a crisis of confidence in the country. Findings must be “reported comprehensively and in a transparent manner" to convince Malaysians there is no concealing of the truth, they said in a statement on Oct. 6.

1MDB said on Oct. 9 it is seeking a “viable resolution” with the central bank and is addressing its concerns, even as the attorney general said the company didn’t commit any offense.

“He has the right to make that assessment," Zeti said of the attorney general. "But for the central bank we believe it is very, very important to comply with our rules and regulations that we have in place. This is vital, it’s critical for the functioning of the financial system" and its integrity, she said.

Bank Negara was part of a task force investigating 1MDB that included the police, the anti-corruption commission and attorney general’s office. The government in July replaced attorney general Abdul Gani Patail for health reasons, with former Federal Court judge Apandi.

In the latest salvo Tuesday, Apandi said Bank Negara didn’t request information from 1MDB such as names or bank account numbers of recipients of its investments, or ask how funds would be transferred overseas. “As far as omission is concerned, there is no obligation to inform unless requested.”

Before it's here, it's on the Bloomberg Terminal.