Singapore to Ban Former Goldman Banker in Connection With 1MDB Scandal

Executive allegedly wrote unauthorized reference letter for Malaysian U.S. authorities say is at the center of fraud at state investment fund

The Monetary Authority of Singapore.
The Monetary Authority of Singapore. PHOTO: BLOOMBERG NEWS

Singapore’s probe into a multibillion-dollar financial scandal touched Goldman Sachs Group Inc. for the first time on Friday as its central bank said it was planning to ban the Wall Street firm’s former top executive in Southeast Asia from operating in the city-state’s financial system for 10 years.

The executive, Tim Leissner, was Goldman’s point man on deals involving Malaysian state investment fund 1Malaysia Development Bhd., or 1MDB. The Monetary Authority of Singapore, the central bank, announced the proposed ban on Mr. Leissner after it found he had written a recommendation letter for a Malaysian financier, Jho Low, in June 2015. In it, Mr. Leissner claimed that Goldman had performed due diligence on Mr. Low.

Tim Leissner

“These statements were untrue and were made by Mr. Leissner without Goldman Sachs’ knowledge or consent,” the MAS statement said.

Goldman Sachs said in a statement Friday that it had discovered the matter in January 2016 and reported it to Singapore authorities. Mr. Leissner left Goldman in February after Goldman put him on leave.

Jho Low

Attempts to reach Mr. Leissner, who is living in Los Angeles, weren’t immediately successful. He has previously denied wrongdoing. A lawyer for Mr. Leissner on Friday said his client had not been aware of any planned regulatory action by Singapore against him. Mr. Leissner has now been invited by Singapore authorities to respond and looks forward to doing so, the lawyer added.

U.S. investigators claim Mr. Low was a mastermind of a massive alleged fraud at 1MDB that spread world-wide. Some investigators have described it as one of the world’s largest-ever financial swindles.

Attempts to reach Mr. Low, who has denied wrongdoing, were unsuccessful. He’s also being sought by authorities in Singapore, said a person with knowledge of the matter.

Goldman made around $600 million in fees in 2012 and 2013 selling a total of $6.5 billion in bonds for 1MDB, its largest payday anywhere in the world in those years. Much of the proceeds of the bonds were siphoned off immediately into offshore accounts and used to buy luxury real estate in the U.S., finance Hollywood movies and acquire other assets, the U.S. Department of Justice alleged in a lawsuit this summer.

The 1MDB fund and Goldman have denied wrongdoing. Malaysian authorities have also cleared 1MDB of wrongdoing.

The letter cited by the Singaporean announcement was written by Mr. Leissner to a Luxembourg bank to help Mr. Low open an account there, although he never did so, according to people familiar with the matter. The young Malaysian and his associates opened hundreds of accounts around the world, especially in Switzerland and Singapore, and used them to funnel money taken from 1MDB, according to investigations that are ongoing in the U.S., Singapore, Switzerland and elsewhere.

The use of Singapore’s banking system to funnel hundreds of millions of dollars in allegedly stolen funds has embarrassed authorities here, who in the past few months have taken action to penalize banks involved in allegedly moving 1MDB money, including shuttering branches of two Swiss private banks.

Mr. Leissner, a German national who had been doing deals for Goldman in Malaysia since 2002, got to know Mr. Low a few years later, say people familiar with the matter. Mr. Low had been bringing Middle Eastern investment to Malaysia, and, in 2009, he persuaded the sultan of a Malaysian state to set up an oil-wealth fund, which Goldman was appointed to advise, according to those people. The state oil-wealth fund was soon taken over by Malaysia’s federal government and named 1MDB. Mr. Low took no formal role at 1MDB but ran the fund behind the scenes, say people who worked there.

The fund was supposed to boost growth in Malaysia and its first deal was to invest $1 billion in an offshore oil venture. But $700 million was immediately stolen and sent into an account controlled by Mr. Low at Swiss bank Coutts & Co. in Zurich, the U.S. Justice Department suit alleges. From there the money flowed to numerous other accounts in Singapore and elsewhere, the first drips of at least $3.5 billion that the Justice Department claims was siphoned from 1MDB between 2009 and 2013.

Some of the 1MDB money ended up in accounts owned by Malaysian Prime Minister Najib Razak and was used for political spending, according to the U.S. Justice Department and Malaysian investigation documents. The prime minister has denied wrongdoing. Malaysia’s Attorney General has said the money Mr. Najib received was a gift from Saudi Arabia and most was returned. Mr. Najib has been cleared of any wrongdoing by Malaysian authorities.

On Friday, the Monetary Authority of Singapore also levied financial penalties of 5.2 million Singapore dollars ($3.65 million) on Standard Chartered Ltd. and 2.4 million Singapore dollars on Coutts for failures in their anti-money-laundering controls. The authority didn’t mention 1MDB in relation to these fines, but both banks played a role in moving money taken from the Malaysian fund, according to the U.S. Justice Department lawsuit.

A request to Coutts for comment was referred to a spokesman at the Royal Bank of Scotland PLC., which owned Coutts during the period of alleged control failures and is winding down the remaining Coutts Singapore operations it still controls.

The RBS spokesman said the company regrets any failings and has sought to strengthen its policies. Standard Chartered said in a statement Friday it regrets that 1MDB-related transactions passed through the bank. It said it had reported the suspicious transactions, cooperated with authorities and had taken action to strengthen its controls.

In 2012, hundreds of millions of dollars in money originating with 1MDB was transferred to an account with Standard Chartered in Singapore controlled by an associate of Mr. Low, according to the U.S. Justice Department suit.

The money that ended up in Standard Chartered in Singapore came from billions in bonds that Goldman had sold for 1MDB in 2012 to finance the acquisition of power plants, the U.S. Justice Department said. The bonds were backed by an Abu Dhabi sovereign-wealth fund on the suggestion of Mr. Low, said a person involved with the deal.

Earlier this year, Singapore also fined UBS Group AG’s local unit and the city-state’s largest local bank DBS Bank Ltd. for money-laundering control failures related to 1MDB. UBS and DBS said they had voluntarily reported suspicious transactions and are committed to improving their own approaches to stopping money laundering.

Write to Tom Wright at tom.wright@wsj.com and Jake Maxwell Watts at jake.watts@wsj.com

http://www.wsj.com/articles/singapore-to-ban-former-goldman-banker-in-connection-with-1mdb-scandal-1480645048

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