Asia-Pacific

Explainer: What is Malaysia’s 1MDB corruption scandal?

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Malaysian Prime Minister Najib Razak has been embroiled in an ongoing corruption scandal involving hundreds of millions of dollars and triggering investigations around the world.

The scandal involves 1Malaysia Development Berhad (1MDB), a government-owned sovereign wealth fund. The Malaysian government bought the fund in 2009 and Najib Razak became the chair of the 1MDB advisory board shortly after he became Prime Minister that year. 

The fund was intended to support projects of national significance to boost Malaysia's economic growth and attract international investment. 

However the fund performed disastrously. From 2009 onwards many of 1MDB's investments failed and by the end of 2014 the fund had more than $12 billion in debt and was struggling to repay its loans.

$900 million bombshell 

In July 2015 the Wall Street journal, citing a leaked Malaysian government investigation, reported that more than $900 million siphoned from 1MDB had made its way into Mr Najib’s personal bank accounts.

Mr Najib’s accounts were held with the Malaysian bank AmBank and the transactions were said to have taken place between 2011 and 2013.

Mr Najib furiously denied allegations of corruption and said they were part of a conspiracy to topple the government. He also said the money in his accounts was a donation from a member of the Saudi Arabian royal family.

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Mr Najib quickly sacked his Deputy Prime Minister Muhyiddin Yassin, who had been calling on him to explain the funds in his account.

The government also replaced the country’s Attorney-General and a committee probing 1MDB was halted.

Hundreds of thousands of outraged Malaysians took to the streets of Kuala Lumpur to call for Mr Najib to resign over the scandal. Malaysia’s former prime minister of 22 years, Mahathir Mohamad, joined the protests.

Shortly after the scandal broke the country’s Deputy Public Prosecutor Kevin Morais was kidnapped in broad daylight and 12 days later his body was found inside a barrel filled with cement and dumped in a swamp.

Mr Morais’s family later said he was working on corruption charges against Mr Najib at the time of his disappearance.

Malaysians took to the streets in 2015 after allegation Mr Najib siphoned millions from 1MDB.
Malaysians took to the streets in 2015 after allegation Mr Najib siphoned millions from 1MDB.
EPA/AAP

Investigations go global

After investigating allegations, Malaysia’s new Attorney-General Apandi Ali in January 2016 cleared Mr Najib of any wrongdoing in relation to the scandal.

But several countries around the world, including Switzerland, Singapore, the United Kingdom and the United States, continued their probes into corruption and money laundering linked to the fund.

In July 2016 the US Department of Justice announced the move to seize more than $1.3 billion in assets allegedly siphoned from 1MDB.

It is the largest-ever seizure by the Department’s Kleptocracy Asset Recovery Initiative and assets seized include luxury boats, apartments and the rights to Oscar-nominated film 'The Wolf of Wall Street', which was funded by Mr Najib’s stepson, Riza Aziz.

The US Department of Justice seizure documents said an unnamed ‘Malaysian Official 1’ was connected to the alleged money laundering. The ‘Malaysian Official 1’ was said to be a senior government figure and a close relative of Mr Riza.

Despite the many predictions of Mr Najib’s political downfall when the scandal broke, he has survived. Mr Najib has maintained his position at the head of the United Malays National Organisation, the political party which has ruled Malaysia for 60 years since independence.

However general elections expected later this year will be the first real test of public support following the scandal.

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