Malaysia 2018


Malaysia ranks relatively well internationally in terms of corruption perceptions, indicating that it is not seen as a high-risk environment for corruption in general.1 It also ranks in the middle of the Basel Anti-Money Laundering Index, indicating a moderate risk of money laundering. This is reflected in the Tax Justice Network’s Financial Secrecy Index report, which while only looking at the Federal Territory of Labuan, an offshore financial centre, highlights that at least there money laundering standards are strong.2 The same report highlights however that despite this, Labuan is exceptional secretive when it comes to ownership of trusts, foundations and companies and when it comes to reporting,3 all of which are key tools used to facilitate the offshoring of illicitly acquired wealth.

Malaysia has poor indicators when it comes to voice and accountability4 and press freedom,5 indicating challenges in holding those in power to account and consequently the potential for grand corruption.

Several reports of the last years have in particular highlighted the dominance of the Barisan Nasional (National Front) Coalition and the executive in general over other branches of government, as well as allegations of gerrymandering and unfair electoral practices,6 as major accountability challenges in Malaysia. The 2018 elections however heralded change in Malaysia’s government, with the opposition Pakatan Harapan (Alliance for Hope) winning for the first time since Malaysian independence and with the 1MDB (1 Malaysia Development Berhad) scandal and the rule of law in general being major election issues.7 Whether this will lead to comprehensive and substantive change remains to be seen, particularly regarding investigations beyond 1MDB.

The 1MDB Case

1MDB, a wholly-owned sovereign fund set up by the Government of Malaysia,8 was established in 2009 by the former Prime Minister Najib Tun Razak.’9 In 2015 it missed a loan payment of US $550 million, triggering an investigation in Malaysia. This escalated in June 2015 when the Wall Street Journal broke a story which alleged US $681 million of 1MDB money had been deposited in Najib’s personal bank account.10 Malaysian investigations cleared Najib, identifying the money as a gift from Saudi Arabia,11 but investigations began in the US and Switzerland, with the US bringing a civil lawsuit under the Foreign Corrupt Practices Act for USD 4.5 billion alleged to have been stolen from 1MDB both in the US and elsewhere by high-level fund officials and their associates, including Najib. A criminal investigation was also opened in 2018.12 Following the 2018 elections, the case was reopened in Malaysia and Najib was arrested.13 Najib denies all wrongdoing.14

Current investigations

CHF 104 million (USD 105 million) has been confiscated from Swiss bank profits related to the 1MDB case. Civil society from Malaysia has campaigned for the fair and transparent return of this money.15 The Swiss authorities have announced their intention to return this money to Malaysia after criminal proceedings have been completed in other ongoing cases and have entered into negotiations with the Malaysian government.16

The United States has initiated civil and criminal proceedings related to 1MDB and is seeking to recover USD 1.7 billion in its lawsuit.17 Officials from the US have also entered into negotiations with the Malaysia government to discuss return of any assets ultimately confiscated.18

An estimated USD 180 million in assets have been seized in Singapore19 and to date USD 11.2 million has been approved to be returned to Malaysia.20 Singapore has also entered into negotiations with the Malaysian government on modalities of return.21

A superyacht believed to be the proceeds of corruption was seized and returned to Malaysia by Indonesia.22

There have been suggestions that UK based banks may have been involved in the case.23

Authorities have undertaken investigations into embezzlements relating to accounts in Luxembourg.24

Investigations have taken place into the alleged role of two UAE citizens in helping to funnel money via the British Virgin Islands.25

Other cases

Apart from the 1MDB case, a coalition of national and international NGOs, in particular the Bruno Manser Fund, the C4 Center and Bersih 2.0 have raised a suspicion of grand corruption in relation to the former Chief Minister and current Governor of Sarawak state: Abdul Taib Mahmud. During his time in office, the former chief minister was also the minister of finance and the minister for natural resources for the state. They have alleged that through control over logging concessions, his personal and his family’s wealth has grown to several billion dollars, with estimates that his assets amount to USD 15 billion.26 Investigations into possible corruption and/or money laundering have taken place in Germany,27 Switzerland,28 and the UK,29 but results are not yet public.

International Institutional Engagement

Malaysia is engaged in several asset recovery initiatives. It is a member of the Asset Recovery Interagency Network- Asia Pacific30 and has been a member of the Financial Action Task Force (FATF) since February 2016.31 It is also a member of the Asia/Pacific Group on Money Laundering (APG).32 The latest FATF report for Malaysia, from 2015, recommends several Priority Actions, including placing greater focus on obtaining money laundering convictions and confiscation of assets, in particular relating to high-risk offences.33

According to the World Bank/UNODC’s StAR initiative, Malaysia has engaged with the initiative on asset recovery.34 Malaysia was not a focus country at the Global Forum for Asset Recovery, nor has there been a regional equivalent.

Our Reports on Malaysia

The Stolen Wealth

Our report with the Frierich Ebert Foundation on opportunities and challenges for civil society in asset recovery


  1. Transparency International Corruption Perceptions Index 2017
  2. Tax Justice Network: Financial Secrecy Index 2018 – Report on Malaysia (Labuan) (2018).
  3. As above.
  4. World Bank Governance Indicators 2018: Malaysia, http://info.worldbank.org/governance/wgi/#reports [accessed 30 September 2018].
  5. Reporters without Borders: Press Freedom Index 2018, https://rsf.org/en/ranking [accessed 30 September 2018].
  6. Bertelsmann Stiftung: Transformation Index 2018: Malaysia, https://www.bti-project.org/en/reports/country-reports/detail/itc/mys/#management [accessed 30 September 2018].
  7. Al Jazeera, Malaysia’s opposition pulls off shocking election win, 10 May 2018, https://www.aljazeera.com/news/2018/05/malaysia-opposition-pulls-shocking-election-win-180509184811723.html [accessed 30 September 2018].
  8. 1MDB: About us, Archived. https://web.archive.org/web/20140506001136/http://www.1mdb.com.my/about-us/what-we-do [accessed 30 September 2018]-
  9. A. Ananthalakshmi and Emily Chow, ‘Timeline: The 1MDB scandal that led to the arrest of former Malaysian PM Najib’ Reuters, 3 July 2018, https://www.reuters.com/article/us-malaysia-politics-najib-timeline/timeline-the-1mdb-scandal-that-led-to-the-arrest-of-former-malaysian-pm-najib-idUSKBN1JT1CZ [accessed 30 September 2018].
  10. As above.
  11. BBC, ‘Malaysia 1MDB: Saudi minister says Najib funds were donation,’ 15 April 2016, https://www.bbc.com/news/world-asia-36051474 [accessed 30 September 2018].
  12. Joseph Sipalan, Rozanna Latiff, ‘Malaysian ex-prime minister Najib arrested in stunning fall from grace’ Reuters, 3 July 2018. https://uk.reuters.com/article/uk-malaysia-politics-najib/former-malaysian-premier-najib-arrested-amid-graft-probe-idUKKBN1JT0VV [accessed 30 September 2018].
  13.  A. Ananthalakshmi and Emily Chow (n.9)
  14. Joseph Sipalan, Rozanna Latiff, ‘Malaysian ex-prime minister Najib arrested in stunning fall from grace’ Reuters, 3 July 2018. https://uk.reuters.com/article/uk-malaysia-politics-najib/former-malaysian-premier-najib-arrested-amid-graft-probe-idUKKBN1JT0VV [accessed 30 September 2018].
  15. Bruno Manser Funds, Swiss lawmakers say Malaysian government never claimed confiscated 1MDB profits,13 March 2018, https://www.bmf.ch/en/news/swiss-lawmakers-say-malaysian-government-never-claimed-confiscated-1mdb-profits [accessed 30 September 2018].
  16.  The Star (Malaysia), ‘Swiss AG: ‘1MDB-linked funds will be returned’’ 11 July 2018, https://www.thestar.com.my/news/nation/2018/07/11/1mdblinked-funds-will-be-returned-switzerland-will-not-enrich-itself-by-keeping-illicit-or-stolen-as/#6jJfQG6hV0Tvud4m.99 [accessed 30 September 2018].
  17.  CNBC/Reuters, ‘Malaysia’s embattled former leader Najib questioned by anti-corruption agency’, 21 May 2018, https://www.cnbc.com/2018/05/21/us-department-of-justice-says-it-will-pursue-investigations-related-to-malaysias-1mdb.html [accessed 30 September 2018].
  18. The Star (Malaysia) (n.16).
  19. Fortune / Reuters, ‘As 1MDB Scandal Unravels, Singapore Seizes $177 Million in Assets’ 21 July 2016, http://fortune.com/2016/07/21/as-1mdb-scandal-unravels-singapore-seizes-177-million-in-assets/ [accessed 30 September 2018].
  20. The Star, ‘Guan Eng: RM46mil 1MDB-linked funds from Singapore is just ‘tip of the iceberg’’ 10 September 2018, https://www.thestar.com.my/news/nation/2018/09/10/guan-eng-rm46mil-1mdblinked-funds-from-singapore-is-just-tip-of-the-iceberg/#3IP026wLcZ5QtQ0A.99 [accessed 30 September 2018].
  21. The Star (Malaysia) (n.16).
  22. The Star, ‘Equanimity was properly seized under the laws of Malaysia, says AG’ 7 August 2018, https://www.thestar.com.my/news/nation/2018/08/07/equanimity-was-properly-seized-under-the-laws-of-malaysia/  [accessed 30 September 2018].
  23. Rachel Middleton, ‘UK weighs in on Malaysia’s 1MDB state fund as it launches own investigation,’ International Business Times, 19 February 2016, https://www.ibtimes.co.uk/uk-weighs-malaysias-1mdb-state-fund-it-launches-own-investigation-1542919 [accessed 30 September 2018].
  24. Stephanie Bodoni  and Shamim Adam, ‘Luxembourg Prosecutors Look for Embezzlement at Malaysia’s 1MDB’ Bloomberg, 31 March 2016, https://www.bloomberg.com/news/articles/2016-03-31/luxembourg-probes-embezzlement-claims-linked-to-malaysia-s-1mdb [accessed 30 September 2018].
  25. Malaysiakini, ‘UAE bans travel, freezes ex-IPIC execs’ assets in 1MDB probe’ 26 April 2016, https://www.malaysiakini.com/news/336216 [accessed 30 September 2018],
  26. Bruno Manser Fund, ‘Corruption in the tropical-timber trade’ https://www.bmf.ch/en/projects-and-campaigns/corruption-in-the-tropical-timber-trade/ [accessed 30 September 2018].
  27. Sarawak Report, ‘Taib Probe Opens In Germany – Breaking News!’ 11 September 2011, http://www.sarawakreport.org/2011/09/taib-probe-opens-in-germany-breaking-news/ [accessed 30 September 2018].
  28. Sarawak Report, Swiss President Orders an Investigation into Taib’s Assets! – Exclusive’ 12 May 2011, http://www.sarawakreport.org/2011/05/swiss-president-orders-an-investigation-into-taibs-assets-exclusive/ [accessed 30 September 2018].
  29. Web Archive of Free Malaysia Today, ‘UK govt ‘monitoring’ Taib’s dealings’ 20 September 2011, https://web.archive.org/web/20121222074532/http://www.freemalaysiatoday.com/category/nation/2011/09/20/uk-govt-monitoring-taibs-dealings/ [accessed 30 September 2018].
  30. http://www.arin-ap.org/main.do [accessed 29 September 2018].
  31. http://www.fatf-gafi.org/countries/#Malaysia [accessed 29 September 2018]
  32. http://www.apgml.org/members-and-observers/members/default.aspx [accessed 29 September 2018].
  33. Financial Action Task Force, Anti-money laundering and counter-terrorist financing measures – Malaysia Mutual Evaluation Report, September 2015, p. 12
  34. https://star.worldbank.org/star/content/milestone-stolen-asset-recovery