Singapore's financial regulator MAS gave a hint of how it will distance itself from the 1MDB scandal, denying that the proceeds of a $3 billion Malaysian bond deal had passed through disgraced BSI in the city-state.
The story originated with the «Wall Street Journal», which delved into the details of a $3 billion bond deal run by Goldman Sachs for Malaysia. Part of those proceeds are alleged to have ultimately landed in prime minister Najib Razak's coffers, via a complicated journey involving BSI in Singapore, a Bangkok funds firm, and a British Virgin Islands shell company which no longer exists, according to the newspaper's reporting.
Late on Wednesday, the MAS issued a statement saying the bond deal's proceeds as described in an undisclosed «media inquiry» did not pass through Singapore, as originally reported.
The «WSJ» has since corrected an online version of its story to say that the bond proceeds were wired to 1MDB's account with BSI in Switzerland, not in Singapore.
MAS Under Pressure
On one hand, a correction to clarify a key element of its story is an embarrassing editorial misstep for a newspaper renowned for investigative precision and for stellar reporting on the 1MDB scandal, even citing bank-transfer documents it had seen. But more notably, MAS's statement nicely highlights the pressure that Singapore itself is under due to the burgeoning scandal.
In its first test, Singapore will be eager to limit fallout from the scandal on the reputation of its relatively young financial center. A show of force is expected from Singaporean officials not just against BSI itself, which was shut down last month over money-laundering and corruption allegations, but also against individual bankers like Yeo Jiawei, who is expected to stand trial in the coming months.
Swiss – Singapore Tit-for-Tat
By rejecting the blame for failing to spot one particular bond deal – presumably one of countless suspicious BSI transactions carried out on behalf of 1MDB – MAS appears to be shifting the blame from Singapore to Switzerland in this instance. This raises the specter of an awkward regulatory tit-for-tat with Switzerland, after the two countries worked in lockstep in shutting down BSI. The bank had been under Swiss investigation since 2013 for suspicious transactions and margins.
Malaysia's government, which has reportedly inadequately investigated the 1MDB scandal and even ignored key evidence, seized on the MAS statement to attack the «WSJ» as purportedly in cahoots with opposition parties in the country. The paper's publisher, Dow Jones, backed the reporting.
