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1MDB probe widened to cover money flows to BN parties

This article is more than 12 months old

Parties and firms with funds from 1MDB could have bank accounts frozen pending investigation

Malaysia has widened its investigation into state-owned 1Malaysia Development Berhad (1MDB) to cover flow of funds to parties in the former ruling coalition Barisan Nasional (BN).

Senior government officials and financial executives told The Straits Times that investigators are looking into money flowing from companies tied to 1MDB and fund transfers from former prime minister Najib Razak's private accounts to key BN partners and politicians.

The probe, which is being carried out by regulatory agencies under the Anti-Money Laundering Act, has also extended to law firms tied to the previous administration, the officials said.

They declined to identify the political entities or private legal firms. But they acknowledged that this new dimension of the inquiry could trigger serious political aftershocks.

The parties and legal firms in possession of funds that flowed out of 1MDB or its related entities could find their bank accounts frozen pending a full investigation and trial.

Elected representatives could also face being disqualified as MPs or state assemblymen if found guilty.

There has been speculation that BN politicians financed their activities and campaigns with funds from 1MDB.

Mr Najib set up the state fund in April 2009, and it allegedly morphed into a private political slush fund for his administration, which was booted out of power last month.

The 1MDB debacle has been the focus of one of the biggest multi-jurisdiction money laundering probes in the world.

The US Department of Justice has declared it was seeking to recover more than US$1.7 billion (S$2.3 billion) in assets traceable to funds allegedly misappropriated from 1MDB.

It also said another US$4.5 billion was diverted from 1MDB and laundered through shell companies and bank accounts globally.

The international investigations into 1MDB were a result of probes initiated by agencies, such as the Malaysian Anti-Corruption Commission and the central bank, Bank Negara Malaysia, since late 2014.

Domestic investigations came to a halt in 2015 when Mr Najib sacked his then deputy Muhyiddin Yassin and other key officials, who he claimed were part of a conspiracy to remove him as prime minister.

The purge allowed him to replace them with close allies, including an attorney-general who immediately absolved his administration of wrongdoing.

Prime Minister Mahathir Mohamad vowed that those responsible for the 1MDB debacle must be brought to book.

Government officials expect the Mahathir administration to level charges related to corruption, embezzlement of state resources and national economic sabotage against Mr Najib early next month.

REPERCUSSIONS

While the legal proceedings are expected to drag on for years, the probe into the flow of funds to BN-linked entities and politicians could have more immediate repercussions.

The ability to dispense patronage has long been the lifeblood of key BN members such as Umno and the Malaysian Chinese Association (MCA).

Both parties have sizeable business interests.

Umno had long used its unfettered authority over the government to dispense lucrative licences, contracts and positions at state-owned entities to reward political warlords and senior officials.

Its business interests are grouped under a private company called Temasek Padu - estimated to be valued at RM800 million (S$270 million).

The MCA's business assets, estimated to be in excess of RM3 billion, are grouped under a private entity, Huaren Holdings.

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