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Article
Publication date: 4 June 2020

Fabian Maximilian Johannes Teichmann and Marie-Christin Falker

This case study highlights why and how the Swiss banking sector played a crucial role in the 1Malaysia Development Berhad (1MDB) corruption scandal. In particular, the…

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Abstract

Purpose

This case study highlights why and how the Swiss banking sector played a crucial role in the 1Malaysia Development Berhad (1MDB) corruption scandal. In particular, the paper illustrates how different actors in the Swiss financial sector neglected compliance guidelines and due diligence, thus effectively facilitating the laundering of misappropriated 1MDB funds. The purpose of this paper is to give bankers and compliance officers an overview of the methods money launderers use to circumvent compliance measures so that the Swiss banking sector can be protected more effectively from abuse. In addition, there is discussion whether current regulations, including banking secrecy, should be amended.

Design/methodology/approach

This paper used a content analysis methodological approach to collect data from media sources. Qualitative methods were used to analyze these sources.

Findings

The findings reveal that the Swiss banking sector played a major role in facilitating the siphoning and subsequent laundering of 1MDB funds by neglecting due diligence obligations.

Practical implications

This paper advocates a more consequential implementation of the existing anti-money laundering and corruption regulations.

Social implications

A reworking of the 1MDB scandal should be of interest to compliance professionals in the banking sector and citizens that have been negatively affected 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 sector in the 1MDB scandal.

Open Access
Article
Publication date: 8 April 2020

David Seth Jones

The aim of the paper is to examine the various aspects of the 1MDB scandal including the extent and types of corruption that occurred and the action taken to deal with…

38464

Abstract

Purpose

The aim of the paper is to examine the various aspects of the 1MDB scandal including the extent and types of corruption that occurred and the action taken to deal with them. In doing this, the paper seeks to identify the reasons for the scandal and the lessons that can be learnt to avoid such a scandal in Malaysia and elsewhere in the future.

Design/methodology/approach

The research for the paper is based on evidence from court hearings, reports of watchdog and regulatory agencies, media reports, and various articles and books written about 1MDB.

Findings

The paper shows that most of the scandal involved embezzlement, bribery, false declarations and bond mispricing relating to extensive borrowing by 1MDB, and entailed a global network of shell companies and individuals through which the illicit money was passed. It also shows weak governance in 1MDB, poor internal controls within banks, the failure of watchdog and enforcement bodies to take the necessary action partly due to political control over them, and overall the lack of political will to deal with the scandal.

Originality/value

The paper builds on the findings of other papers and books written on the 1MDB scandal. It does this by linking the corruption to the borrowings of 1MDB, the international network of money-laundering and bribery through which illicit money flowed, and the poor internal controls in the organisation. It also builds on previous research by highlighting the failure of banks to identify money-laundering and of watchdog and enforcement bodies to deal with the corruption. A further value of the paper is to identify the lessons that can be learnt about combatting corruption on such a scale.

Details

Public Administration and Policy, vol. 23 no. 1
Type: Research Article
ISSN: 1727-2645

Keywords

Expert briefing
Publication date: 9 July 2015

The political and economic consequences of the 1Malaysia Development Berhad fund controversy.

Details

DOI: 10.1108/OXAN-DB200868

ISSN: 2633-304X

Keywords

Geographic
Topical
Book part
Publication date: 11 October 2017

Augustine Pang, Ratna Damayanti and Eugene Yong-Sheng Woon

In 2015, Malaysia’s investment vehicle, 1Malaysia Development Berhad (1MDB), came under international scrutiny after it amassed a debt of US$11 billion (10.3 billion…

Abstract

In 2015, Malaysia’s investment vehicle, 1Malaysia Development Berhad (1MDB), came under international scrutiny after it amassed a debt of US$11 billion (10.3 billion) (Wright & Clark, 2015), which it had difficulty repaying. More disturbingly, investigators found that US$700 million (658 million) was transferred into the personal bank account of Malaysia’s prime minister, Najib Razak, founder and chairman of 1MDB’s advisory board (Wright & Clark, 2015). Najib was also accused of embezzling state money (Reuters, 2015) and damaging the image of the country (“Najib tried to bribe me”, 2015). This chapter aims to examine the strategies used by the Malaysian prime minister to repair his image in the 1MDB scandal, the effectiveness of these strategies, and how these impacted Malaysia’s public diplomacy efforts in restoring the country’s image and reputation. Findings showed that the prime minister denied wrongdoing, and simultaneously bolstered his position and promised to turn 1MDB around. In contrast to the current explication of Benoit and Pang’s (2008) image repair strategies, Najib’s way of attacking the accusers sheds light into how image repair strategies may be operationalized in the Asian context. A new image repair strategy – diversion – is proposed to be added to the existing framework.

Details

How Strategic Communication Shapes Value and Innovation in Society
Type: Book
ISBN: 978-1-78714-716-4

Keywords

Expert briefing
Publication date: 12 February 2016

The PAC will compile its report, while the Auditor General's office, which has also been investigating, will make its report available later in February. Months of…

Expert briefing
Publication date: 3 September 2015

Malaysia's political outlook following the Bersih 4 protests.

Details

DOI: 10.1108/OXAN-DB203124

ISSN: 2633-304X

Keywords

Geographic
Topical
Executive summary
Publication date: 21 July 2016

MALAYSIA: 1MDB pressure will rise on Kuala Lumpur

Details

DOI: 10.1108/OXAN-ES212534

ISSN: 2633-304X

Keywords

Geographic
Topical
Executive summary
Publication date: 4 April 2016

MALAYSIA/INT: 1MDB fund probes pose reputation risks

Expert briefing
Publication date: 5 August 2015

The Malaysian cabinet reshuffle's implications.

Details

DOI: 10.1108/OXAN-DB201465

ISSN: 2633-304X

Keywords

Geographic
Topical
Executive summary
Publication date: 2 February 2016

MALAYSIA: 1MDB criticisms will intensify

Details

DOI: 10.1108/OXAN-ES208213

ISSN: 2633-304X

Keywords

Geographic
Topical
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