The 1MDB case and the Swiss banking sector
| Pages | 276-288 |
| DOI | https://doi.org/10.1108/JMLC-04-2020-0037 |
| Published date | 04 June 2020 |
| Date | 04 June 2020 |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Fabian Maximilian Johannes Teichmann,Marie-Christin Falker |
The 1MDB case and the Swiss
banking sector
Fabian Maximilian Johannes Teichmann and Marie-Christin Falker
Teichmann International (Schweiz) AG, St. Gallen, Switzerland
Abstract
Purpose –This case study highlights why and how the Swiss bankingsector played a crucial role in the
1Malaysia DevelopmentBerhad (1MDB) corruption scandal. In particular, the paper illustrateshow different
actors in the Swiss financial sector neglected compliance guidelines and due diligence, thus effectively
facilitating the launderingof misappropriated 1MDB funds. The purpose of this paperis to give bankers and
compliance officersan overview of the methods money launderersuse to circumvent compliance measures so
that the Swiss banking sector can be protectedmore effectively from abuse. In addition, there is discussion
whethercurrent regulations, including bankingsecrecy, should be amended.
Design/methodology/approach –This paper used a content analysis methodological approach to
collectdata from media sources. Qualitative methodswere used to analyze these sources.
Findings –The findings reveal that the Swiss banking sector played a major role in facilitating the
siphoningand subsequent laundering of 1MDB funds byneglecting due diligence obligations.
Practical implications –This paper advocatesa more consequentialimplementation of the existing anti-
money launderingand corruption regulations.
Social implications –A reworking of the 1MDBscandal should be of interest to compliance professionals
in the banking sector and citizens that have been negativelyaffected or are concerned by the involved high-
level corruption.
Originality/value –This paper is the first of its kind to study the role of the Swiss banking sectorin the
1MDB scandal.
Keywords Corruption, Due diligence, Money laundering, Swiss banking, 1MDB, Jho low,
Money laundering, Najib Razak, Banca della Svizzera Italiana (BSI), Banking secrecy,
Goldman Sachs, Switzerland
Paper type Case study
1. Introduction
The high-level corruption scandal involving Malaysian sovereign wealth fund 1Malaysia
Development Berhad (1MDB) has been the focus of international media reports for several
years. According to the Swiss economic news outlet “Finanz und Wirtschaft”(Herb, 2020),
an estimated amount of US$6.6bn was stolen from 1MDB in one of the most complex fraud
and money laundering schemes to date. Investigations in multiple jurisdictions including
Malaysia, Singapore, and the USA have not yet been concluded and new incriminating
evidence continues to surface regularly, even four years after the fraud was first reported.
Former Malaysian Prime MinisterNajib Razak, who is believed to have been one of the key
players in the scandal and is currently being prosecuted, could potentially face up to
20 years in prison. Around US$700m from the fund was allegedly transferred to Razak’s
personal bank account alone (Herb, 2020). Another key player in the scandal, Jho Low, is
currently in hiding from the authorities. Further, Goldman Sachs, a US American
investment bank, has suffered immense damage to its formerly high reputation on account
of supplying 1MDB with US$6.5bn in 2013. As a result, the company has been sued for
damages in multiple jurisdictions. However, Goldman Sachs was not the only financial
JMLC
24,2
276
Journalof Money Laundering
Control
Vol.24 No. 2, 2021
pp. 276-288
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-04-2020-0037
The current issue and full text archive of this journal is available on Emerald Insight at:
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