Malaysia Central Bank Fines 1MDB for Non-Compliance, Ends Probe

  • Company failed to justify its inability to repatriate funds
  • Central bank's recommendation for criminal charges dismissed

Malaysia’s central bank slapped a fine on 1Malaysia Development Bhd. and announced it was ending its investigation into the troubled state fund, drawing one line under months of probes of 1MDB’s finances.

1MDB failed to explain why it can’t send back some funds from overseas, and has until May 30 to pay the fine for non-compliance, the central bank said in a Thursday statement. Bank Negara did not specify the size of the fine or how much 1MDB was required to repatriate.

The fund was ordered to repatriate the money after the central bank revoked three permissions granted in 2009, 2010 and 2011, Bank Negara said. The fine was issued with the consent of the attorney general.

Central bank governor Zeti Akhtar Aziz, who steps down at the end of this month, has been blunt in her criticism of 1MDB. The bank had requested criminal proceedings at least twice against 1MDB, although its efforts were dismissed by the attorney general’s office. Zeti said last month the central bank was pursuing administrative enforcement actions against 1MDB and that she wanted to bring closure to the case and hand over a clean slate to her successor.

Zeti, 68, has led the central bank for 16 years, with Deputy Governor Muhammad Ibrahim named by Prime Minister Najib Razak this week as her successor.

Inaccurate Disclosures

Bank Negara said in October its probe found inaccurate disclosures when 1MDB sought approvals for offshore investments. It revoked the permissions given and instructed more than $1.8 billion related to multiple deals to be returned to Malaysia.

Debt-ridden 1MDB, which has consistently denied wrongdoing, has been the subject of probes by local agencies as well as countries like Switzerland and Singapore amid allegations of financial irregularities. Najib chairs the advisory board of 1MDB and has faced calls to resign as premier over alleged mismanagement at the fund.

1MDB respects the authority and decision of the central bank and will pay the fine by the due date, the fund said in a statement.

The reputation of the government took another hit Tuesday when 1MDB defaulted on a $1.75 billion bond amid a dispute with Abu Dhabi’s International Petroleum Investment Co., the co-guarantor of the bonds. The missed payment triggered cross defaults on 7.4 billion ringgit ($1.9 billion) of 1MDB debt, including borrowings that are guaranteed by the Malaysian government.

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