October 23, 2020 | AtoZ Markets – British watchdogs, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), has fined Goldman Sachs International (GSI) a total of £96.6 million for their involvement in the 1Malaysia Development Berhad (1MDB) scandal.
The fine is a part of a $2.9 billion global settlement against the investment bank.
Goldman Sachs and the 1MDB scandal
Goldman Sachs underwrote and arranged three bond transactions for the Malaysian state-owned development company 1MDB that raised $6.5 billion.
While the transactions in 2012 and 2013 were carried out by Goldman's overseas divisions, the UK arm partook in them, and the deals were booked here, the FCA ruled.
According to the UK regulator, GSI knew the trades were in a high financial crime risk area and were concerned about the risks of one party in particular, yet it "failed to assess and manage risk to the standard that was required" given those concerns.
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"GSI also failed to address allegations of bribery in 2013 and failed to manage allegations of misconduct with 1MDB in 2015.
Mark Steward, FCA director of enforcement, commented: "'Firms have a crucial role to play in tackling financial crime, and in helping to maintain the integrity of the financial system. GSI’s failure to take appropriate action, in this case, shows that it did not take this responsibility seriously. When confronted with allegations of bribery and staff misconduct, the firm’s mishandling allowed severe misconduct to go unaddressed. There is no amnesty for firms that tackle financial crime poorly, and the size of GSI’s fine reflects that."
Chief executive of the PRA, Sam Wood said:
"We expect firms to manage risk, including financial crime risk, prudently and holistically and for allegations of bribery and misconduct to be taken very seriously. The seriousness of the case and of GSI’s failures in connection with 1MDB are reflected in the size of the PRA’s fine."
Goldman Sachs International fined
The fine imposed on Goldman Sachs International came as part of a far bigger series of settlements totaling $2.9 billion from regulators in the US and Singapore. It comes on top of the $3.9 billion settlement reached in August with the Malaysian government.
The FCA said it took the other settlements into consideration when setting its fines.
The huge corruption scandal around 1MDB sent shockwaves through the political and business worlds in Malaysia before spreading to the US and London as the extent of Goldman Sachs' involvement became clear.
Prosecutors in Malaysia say billions of dollars from the 1MDB fund were stolen from the Malaysians. Authorities say the embezzled money went on ar, property, a private jet, and superyacht.
MAS takes action against Goldman Sachs (Singapore)
In a related development, the Monetary Authority of Singapore (MAS) is also taking action against Goldman Sachs Singapore. According to the announcement, Goldman Sachs Group Inc (“GSG”) has entered into a Deferred Prosecution Agreement (“DPA”) with the Department of Justice of the United States of America.
The DPA provides for a global resolution, led by the US Department of Justice and discussed with, inter alia, Singapore, of GSG’s role in bond offerings related to 1Malaysia Development Berhad (“1MDB”).
As part of the DPA, GSG and its affiliates will pay approximately $2.3 billion to the US authorities. Goldman Sachs Singapore Pte (“GSSP”) will pay $122 million to the Singapore Government for its role in the 1MDB bond offerings.
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