Legal Actions Against 1MDB-involved Global Financial Institutions Stepped Up

Malaysia is focusing on global financial institutions accused of facilitating misappropriation of funds linked to 1Malaysia Development Bhd. 

The government are requesting courts in Malaysia, Singapore and Hong Kong to set early hearing dates in 2026 to “fast-track” existing suits against the financial firms, said Johari Abdul Ghani, who chairs a task force set up to recover assets of the state-owned company also known as 1MDB. 

“We are also reviewing other banks and financial intermediaries involved in the flow of funds from 1MDB”, he was quoted as saying. Malaysia has filed lawsuits at home and abroad against Deutsche Bank AG, Standard Chartered plc, Julius Baer Group Ltd, and RBS Coutts. 

As well as specialised corporate management Amicorp and law firm White & Case. 

1MDB had earlier dropped suits against Goldman Sachs, JPMorgan and Coutts and Co after the firms agreed to pay billions of dollars as settlement. Malaysia, nevertheless, is open to settlement negotiations, Johari was reported as saying. 

On October 14, the Finance Ministry reported that more than RM20 billion had been reclaimed through settlements with several financial institutions involved in the scandal. 

Separately, the Malaysian Anti-Corruption Commission had recovered about RM8 billion in cash and assets, which were already returned to the government’s consolidated fund under the Finance Ministry. 

The Malaysia Open jinx continued to haunt Pearly Tan-Thinaah Muralitharan after the second seeds crashed out in the second round on Thursday. 

The Malaysian pair went down 26-24, 21-17 to Indonesia's world No. 60 pair Febriana Dwipuji Kusuma–Meilysa Trias Puspitasari. 

It meant Pearly-Thinaah have now failed to progress beyond the second round in all five of their Malaysia Open appearances. They exited in the second round on debut in 2022, before suffering first-round defeats in the next three editions.

186 US Banks Are Vulnerable

If you have been following Andrew Henderson (the Nomad Capitalist), he'll convince you that US banks are weaker than you think. In fact, he insists your money isn’t safe anymore. 

 

Notwithstanding, a research paper posted on the Social Science Research Network on March 24, 2023 titled “Monetary Tightening and US Bank Fragility in 2023: Mark-to-Market Losses and Uninsured Depositor Runs?” had concluded that 186 banks in the US are at risk of failure due to rising interest rates and a high proportion of uninsured deposits. 

 

The economists who conducted the study warned that these 186 banks are at risk without government intervention or recapitalization. The findings underscore the importance of careful risk management and diversification of funding sources for banks to ensure their stability in the face of market fluctuations. 

 

In the meantime, German Chancellor Olaf Scholz has promised that the country’s largest lender, Deutsche Bank, will not suffer the same fate as embattled Credit Suisse, after the bank’s shares fell by more than 14 percent on the Frankfurt Stock Exchange on Friday morning trading before clawing back ground in the afternoon to trade 9.5 percent lower, at 8.43 euros ($9.07) a share. 

 

Tumbling bank stocks dragged down markets across Europe on that same day with Germany’s Commerzbank down 7.5 percent, France’s Societe Generale off 5.9 percent and Austria’s Raiffaisen down 5.9 percent. 

 

Deutsche Bank are one of 30 banks considered globally significant financial institutions, so international rules require them to hold higher levels of capital reserves because their failure could cause widespread losses. 

 

Certainly, the banking sector is not out of the woods and US banks in particular are vulnerable.

Banks Finance Oil & Gas Firms

Banks are snubbing the climate pledges they made. 

In April, they indicated they understood that they have an important role in the transition away from fossil fuels, and many signed up to the United Nations-backed Net-Zero Banking Alliance, which requires they set targets to reduce carbon emissions.

However, activist group ShareAction said on Monday that their analysis showed that twenty-five of the said banks have provided $33 billion (£24 billion) in loans and other financing to 50 companies with large oil and gas expansion plans. The oil & gas companies include America’s ExxonMobil, which have tried to defy shareholder demands to cut emissions, state-owned oil company Saudi Aramco and London-listed Shell and BP who have made huge profits from energy price increases in recent months. 

More than half ($19 billion) of the financing since the net zero agreement came from four of alliance’s founders. They were London-headquartered HSBC and Barclays, France’s BNP Paribas and Germany’s Deutsche Bank. 

HSBC, Barclays and BNP Paribas also provided the most finance to these companies since 2016, at $59 billion, $48 billion and $46 billion respectively. 

The banks’ broken promises mean they are giving all of us the one-finger salute.

WFH Tax

The Covid-19 pandemic is exacerbating inequality around the world as people fortunate enough to work remotely continue to earn a pay cheque while millions of others lose their livelihoods or risk their health in jobs that are deemed “essential” but pay low wages. 

Now, there is a proposal that can supposedly level the playing field and create a more inclusive economy as nations rebuild from the pandemic: Tax remote workers. 

In a report titled “What we must do to rebuild”, Deutsche Bank suggest slapping a 5 percent daily tax on people who work from home and using the funds raised to subsidize the lowest-paid workers who are unable to work remotely. 

Deutsche Bank justify by saying that people who WFH “are contributing less to the infrastructure of the economy while still receiving its benefits”. 

To understand what the bank is getting at, keep in mind someone who used to commute from a suburb to work in an office in the city’s CBD, for example. 

That person’s contribution to the economy starts before they even leave home when they choose an outfit purchased from a store that relies on people wanting to look smart on the job. Take away the demand for office wear, and that store and its employees are looking at some lean times. 

If the office worker takes the train into the city, they need to buy a ticket, which helps keep public transport running and transit workers in jobs. If they crave a morning latte, they will swing by a coffee shop, which helps keep baristas gainfully employed, not to mention all the vendors who supply that coffee shop. 

There are the security guards at the office building’s entrance whose jobs depend on people making use of that facility; custodial workers who earn their living cleaning it; people who make sure the office supply cupboard is stocked – and the list goes on. 

The point is – office workers are an integral part of an economic ecosystem that has been built up over decades, so when they stop going to the office, it negatively affects a lot of jobs and businesses. 

It is claimed that the number of remote workers in the United States has increased ten-fold since the pandemic, and seven-fold in the United Kingdom, therefore, we are talking about a significant disruption. 

Certainly, a proposition worth looking at.

The FinCEN Files Scandal

Rogue banks are in the spotlight again. 

Leaked documents from the US Financial Crimes Enforcement Network (FinCEN) – the people at the US Treasury who combat financial crime – involving about $2 trillion of suspicious transactions have revealed how some of the world's biggest banks have allowed criminals to move dirty money around the world.

These banks such as JPMorgan Chase, HSBC, Deutsche Bank, Standard Chartered Bank, Bank of New York Mellon and more, not only turned a blind eye but they have immensely profited from the dirty money transactions. 

It’s alleged that BNY Mellon, for example, moved more than $1 billion for the financier behind Malaysia’s 1MDB political scandal, and JPMorgan processed more than $50 million for Paul Manafort, the former campaign manager for US President Donald Trump.  

The FinCEN files are more than 2,500 documents, most of which were files that banks sent to the US authorities between 2000 and 2017. They raise concerns about what their clients might be doing. 

These documents are some of the international banking system's most closely guarded secrets. Banks use them to report suspicious behaviour but they are not proof of wrongdoing or crime. 

They were leaked to Buzzfeed News and shared with the International Consortium of Investigative Journalists, which distributed them to 108 news organizations in 88 countries – and disclosing activities that banks don't want the public to know about. 

A BBC News report had given us insights into some of these activities: 

HSBC allowed fraudsters to move $80 million of stolen money around the world, even after it learned from US investigators the scheme was a Ponzi scam. 

JP Morgan allowed a company to move more than $1bn through a London account without knowing who owned it. The bank later discovered the company might be owned by a mobster on the FBI's 10 Most Wanted list. 

Evidence that one of Russian President Vladimir Putin's closest associates used Barclays bank in London to avoid sanctions which were meant to stop him using financial services in the West. Some of the cash was used to buy works of art. 

The husband of a woman who has donated £1.7m to the UK's governing Conservative Party's was secretly funded by a Russian oligarch with close ties to President Putin. 

The UK is called a "higher risk jurisdiction" and compared to Cyprus, by the intelligence division of FinCEN. That's because of the number of UK registered companies that appear in the SARs. Over 3,000 UK companies are named in the FinCEN files - more than any other country. 

Chelsea FC owner Roman Abramovich once held secret investments in footballers not owned by his club through an offshore company. 

Deutsche Bank moved money launderers' dirty money for organised crime, terrorists and drug traffickers. 

Standard Chartered moved cash for Arab Bank for more than a decade after clients' accounts at the Jordanian bank had been used in funding terrorism. 

The above illustrates all too clearly that existing regulations and bank compliance processes are grossly inadequate. 

And according to the ICIJ, in the US, almost 200 banking entities filed suspicious transactions.

Part of the list of 200 US banking entities. Data from ICIJ

By law, these banks have to know who their clients are – it's not enough to file SARs and keep taking dirty money from clients while expecting enforcers to deal with the problem. If they have evidence of criminal activity, they should stop moving the cash.

Scandalous – that’s what it is!