“The penalty for failure to meet this request can result in a fine of up to RM50mil or up to 10 years in prison or both,” Bank Negara said in a statement. The investigation entails taking statements from individuals involved in the governance process and obtaining information from other relevant domestic and foreign parties.
PETALING JAYA: Bank Negara has launched a formal enquiry into 1Malaysia Development Bhd’s (1MDB) investments abroad and foreign debts.
The central bank said yesterday that it would issue a legal directive to compel 1MDB to provide it with the required information.
“The penalty for failure to meet this request can result in a fine of up to RM50mil or up to 10 years in prison or both,” it said in a statement.
The investigation entails taking statements from individuals involved in the governance process and obtaining information from other relevant domestic and foreign parties.
1MDB had been under fire after it had to ask for help from the Government to pay for its operations. The company had racked up RM42bil in debts as of March 31, 2014, of which an estimated RM26bil is denominated in foreign currency.
Since 2009, 1MDB has to fork out RM12bil to acquire several power plants and another RM1.71bil to buy prime landbanks from the Government.
Its president and group executive director Arul Kanda Kandasamy said in a separate statement yesterday that the company had investments totalling RM15.4bil overseas.
“we confirm that Bank Negara has commenced an enquiry on 1MDB requiring information ad statements from individuals involved in the company’s governance process. 1MDB wil extend its coorperation to bank Negara and we look forward to this matter reaching swift conclusion,” he said in statement.
1MDB’s massive debts and huge foreign currency exposure have raised concerns about the risk it poses to the country’s banking and financial system.
Under Bank Negara’s laws, all investments that exceed RM50mil a year and any offshore borrowings that exceed RM100mil by resident entities require the central bank’s approval.
This was consistent under the Financial Services Act 2013 and the Exchange Control Act 1953 that was in force prior to 2013, Bank Negara said.
The central bank’s statement yesterday said all submissions that were made by 1MDB had had to comply with the same approval criteria that was applied to submissions by other business entities. If the criteria is not met, then the submission would be rejected.
“No leniency or special exceptions were accorded to 1MDB,” it said.
The investigation thus far has also seen Bank Negara forwarding information received from foreign authorities to the relevant investigation agencies after obtaining the permission from the relevant authorities abroad.
It also noted that “further disclosure of details of the investigation may undermine” the investigation. “Bank Negara is doing everything within the powers provided under its legislation, including collaborating with other agencies, to contribute towards a swift resolution of the matter,” the statement said.
In relation to cross-border movements of funds, the central bank said it also relied on financial intelligence authorities to bring to attention irregular or suspicious transactions.
“Such arrangements for information sharing must conform to international protocols,” it said.
Bank Negara said the arrangements require that the information be kept confidential and any breach would lead to the termination of such arrangements.
“These arrangements also provide for the central bank to share the information with relevant domestic investigation authorities after securing the permission of the foreign authorities,” it said.
Bank Negara highlighted that while it may investigate the matter, it also noted that the scope provided under its legislation did not provide powers for it to investigate in the areas of fraud, tax evasion, corruption, cheating and criminal breach of trust.
It said that these would need to be pursued by other law enforcement agencies.
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