According to the Transparency International’s Corruption Perceptions Index, Malaysia ranks in the middle in terms of corruption perceptions, indicating that the risk of corruption in general is perceived as medium, with a score of 62 / 180 in the 2021 Index.1 It also ranks in the middle of the Basel Anti-Money Laundering Index, indicating a moderate risk of money laundering.2 Malaysia is ranked at 39 / 133 on the Tax Justice Network’s Financial Secrecy Index, indicating high levels of secrecy across several indicators.3 It does not feature on the Corporate Tax Haven Index of the most important tax havens for multinational corporations.
For the last two years, Malaysia has experienced significant political instability. After the historical defeat of the party that had ruled the country for more than sixty years (the Barisan Nasional Coalition or the National Front), the opposition party (Pakatan Harapan – Alliance of Hope) led the government in 2018 and ended an era of excessive power, allegations of gerrymandering and corruption scandals.4
In March 2020 however, the government collapsed and the Barisan Nasional was brought back to power after the defection of part of the governing coalition. After months characterised by social tension, political quarrels, and a national State of Emergency due to Covid-19, the parliament was dissolved again, and the country had its third prime minister in 3 years. Since then, general elections have been brought forward by almost a year and took place on the 19th of November 2022, resulting in a hung parliament and the defeat of the Barisan Nasional Coalition.5 A few days later, the opposition leader, Anwar Ibrahim, was appointed prime minister by the King.
This political crisis has put on hold the country’s various social progresses, which were highly anticipated following the 2018 elections. Even if press freedom has increased in Malaysia in the last two years, and despite a larger media plurality, the Barisan Nasional Coalition reinforced the State’s influence on media and strengthened the legal framework to pressure journalists with legal penalties.6 The BTI Transformation Index qualifies the political transformation of Malaysia and its democratic system as “highly defective” and ranks the country in the average in terms of governance,7 as also shown in the Freedom House’s indicators.8
Asset recovery in Malaysia
The biggest case in Malaysia has been the 1MDB scandal. 1MDB, a wholly-owned sovereign fund set up by the Government of Malaysia, was established in 2009 by the former Prime Minister Najib Tun Razak. In 2015 it missed a loan payment of USD 550 million, triggering an investigation in Malaysia. This escalated in June 2015 when the Wall Street Journal broke a story which alleged USD 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
The first charges were brought in Malaysia against Najib in July 2018 and were followed by criminal charges against Goldman Sachs in December 2018 for their involvement in the case. Throughout 2019 Najib then stood at a series of trials,14 before being convicted and handed a 12 years jail sentence in July 2020, which he started in August 2022.15
In April 2022, a former Goldman Sachs banker, Roger Ng, got convicted for corruption, related to his role in the 1MDB scandal. The U.S. court charged him for violating anti-corruption acts and money-laundering. He is the only person facing a trial in the U.S. and the only Goldman Sachs banker to be convicted.16
- In July 2020, Goldman Sachs settled with Malaysia for USD 3.9 billion. This settlement stems from charges brought by Malaysian prosecutors that Goldman Sachs had misled investors in its role in helping to raise USD 6.5 billion for 1MDB, money which prosecutors alleged had been ultimately stolen.17
- Around USD 1 billion was initially returned from US proceedings to Malaysia. This money relates to properties relating to the businessperson Jho Low for his alleged involvement in the case,18 as well as from a film production company linked to the former PM and his stepson.19 In August 2021, an additional USD 452 million was returned from the U.S. to Malaysia.20
- A superyacht believed to be the proceeds of corruption was seized and returned to Malaysia by Indonesia at the start of the process in 2018.21 This yacht was sold in May 2019 for USD 126 million, believed to have originally been purchased for USD 250 million.22
- Approximately USD 36 million has been or is in the process of being returned from Singapore to Malaysia.23 Initial estimates were of much higher potential returns.24
The Malaysian Ministry of Finance has established a special account for receiving returned stolen assets.27
Controversies have been raised about these returns. There are allegations that the Goldman Sachs settlement was lower than expected, according to persons linked to the previous government, while there have also been concerns that a deal is pending with the Abu Dhabi State Investment Fund, that would also see a lower-than-expected payout.26 Proposals have been made for special parliamentary committees to be set up to oversee these settlements.27
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 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.28 Investigations into possible corruption and/or money laundering have taken place in Germany,29 Switzerland,30 and the UK.31
Another member of the Barisan government has been targeted by strong corruption accusations. Ahmad Zahid Ahmidi faced up to 87 charges for bribery, money laundering, criminal breach of trust and corruption, for events running from 2013 to 2018, when he was Home Minister. The biggest case is the “Foreign Visa System case”, involving a local visa operator, UKSB, and payments allegedly reaching USD 13.5 million to Zahid Ahmidi in order to extend the contract of the company. The trial took place this year and many other politicians were named.32 Zahid Ahmidi was acquitted in September 2022 of these bribery charges but still faces 47 other accusations relating to breach of trust and corruption.33
International Institutional Engagement
Malaysia is engaged in several asset recovery initiatives. It is a member of the Asset Recovery Interagency Network- Asia Pacific34 and has been a member of the Financial Action Task Force (FATF) since February 2016.35 It is also a member of the Asia/Pacific Group on Money Laundering (APG).36
The latest full 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.37 Since then, some progress has been made to address these issues, with four recommendations being upgraded, around cash couriers, guidance and feedback, terrorist financing and targeting sanctions.38
According to the World Bank/UNODC’s StAR initiative, Malaysia has engaged with the initiative on asset recovery.39
- Transparency International, Corruption Perceptions Index 2021 https://www.transparency.org/en/cpi/2021/index/mys#details [accessed on the 14/11/22].
- Basel Institute, Basel Anti-Money Laundering Index 2022, https://index.baselgovernance.org/ranking [accessed on the 14/11/22].
- Tax Justice Network, Financial Secrecy Index 2022, https://fsi.taxjustice.net/ [accessed on the 14/11/22].
- 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 on the 30/09/18].
- Al Jazeera, ‘No clear winner as Malaysia election ends in hung parliament’, 19 November 2022, https://www.aljazeera.com/news/2022/11/19/tight-race-as-votes-counted-in-malaysias-in-general-election [accessed on the 21/11/22].
- Reporters without borders, Malaysia – Country profile 2022, https://rsf.org/en/country/malaysia [accessed on the 14/11/22].
- Bertelsmann Stiftung, Transformation Index 2022: Malaysia, https://bti-project.org/en/reports/country-dashboard/MYS [accessed on the 14/11/22].
- Freedom House, Freedom in the World 2022: Malaysia, https://freedomhouse.org/country/malaysia/freedom-world/2022 [accessed on the 14/11/22].
- 1MDB: About us, Archived. https://web.archive.org/web/20140506001136/http://www.1mdb.com.my/about-us/what-we-do [accessed on the 30/09/18].
- Ananthalakshmi A. and Chow E., ‘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 on the 30/09/22].
- BBC, ‘Malaysia 1MDB: Saudi minister says Najib funds were donation,’ 15 April 2016, https://www.bbc.com/news/world-asia-36051474 [accessed on the 30/09/18].
- Sipalan J., Latiff R., ‘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 on the 30/09/18].
- Ananthalakshmi A. and Chow E., ‘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 on the 30/09/18].
- Al Jazeera, ‘Timeline: How Malaysia’s 1MDB financial scandal unfolded’, 28 July 2020, https://www.aljazeera.com/news/2019/02/timeline-malaysia-1mdb-financial-scandal-unfolded-190211085205283.html [accessed on the 3/09/20].
- Ratcliffe R., ‘1MDB Scandal: Najib Razak handed 12-year jail sentence’, The Guardian, 28 July 2020, https://www.theguardian.com/world/2020/jul/28/1mdb-scandal-najib-razak-verdict-malaysia [accessed on the 03/09/20].
- Cohen L., Godoy J., “Ex-Goldman banker convicted of bribery, money laundering conspiracy charges in 1MDB case”, Reuters, 9 April 2022, https://www.reuters.com/business/finance/hold-us-jury-reaches-verdict-ex-goldman-bankers-1mdb-corruption-trial-2022-04-08/ [accessed on the 14/11/22].
- BBC, ‘Goldman Sachs settles 1MDB scandal with Malaysia for $3.9bn’, 24 July 2020, https://www.bbc.com/news/business-53529075 [accessed 3 September 2020].
- The Sun Daily, ‘US returns US$300m of 1MDB money to Malaysia’, 5 April 2020, https://web.archive.org/web/20200415004739/https://www.thesundaily.my/world/us-returns-us-300m-of-1mdb-money-to-malaysia-YM2259717 [accessed on the 03/09/20].
- Rashvinjeet S. Bedi, ‘RM1.3bil in 1MDB assets recouped’, The Star (MY), 8 May 2019, https://www.thestar.com.my/news/nation/2019/05/08/rm13bil-in-1mdb-assets-recouped/ [accessed on the 03/09/20].
- The United States Department of Justice , Office of Public Affairs, ‘Over $1 Billion in Misappropriate 1MDB Funds now repatriated to Malaysia’, 5 August 2021, https://www.justice.gov/opa/pr/over-1-billion-misappropriated-1mdb-funds-now-repatriated-malaysia [accessed on the 14/11/22].
- 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 on the 30/09/20].
- Batarags L., ‘Take a look inside the glitzy, 300-foot superyacht involved in the 1MDB scandal that Malaysia just sold at a $124 million discount’, Business Insider 4 April 2019, https://www.businessinsider.com/superyacht-equanimity-300-foot-yacht-1mdb-malaysia-photos-2019-2 [accessed on the 03/09/22].
- Channel News Asia, ‘Singapore returning more than S$50 million of 1MDB-related money to Malaysia: Police’, 18 July 2019, https://www.channelnewsasia.com/news/singapore/malaysia-1mdb-recover–50-million-singapore-11715436 [accessed on the 03/09/20].
- 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 on the 03/09/20].
- Yatim H., ‘Equanimity sale proceeds can now be placed in MoF asset recovery account’, The Edge Markets, 22 November 2019, https://www.theedgemarkets.com/article/equanimity-sale-proceeds-can-now-be-placed-mof-asset-recovery-account [accessed on the 03/09/20].
- Bowie N., ‘Malaysia set to let UAE off the 1MDB hook’, Asia Times, 1 September 2020, https://asiatimes.com/2020/09/malaysia-set-to-let-uae-off-the-1mdb-hook/ [accessed on the 03/09/20].
- The Malaysian Reserve, ‘Pua calls for special select committee on 1MDB asset recovery’, The Malaysian Reserce, 6 August 2020, https://themalaysianreserve.com/2020/08/06/pua-calls-for-special-select-committee-on-1mdb-asset-recovery/ [accessed on the 03/09/20].
- Bruno Manser Fund, ‘Corruption in the tropical-timber trade’ https://www.bmf.ch/en/campaigns/corruption-et-bois-tropical-16 [accessed on the 18/11/22].
- 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 on the 30/09/18].
- 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 on the 30/09/18].
- 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 on the 30/09/20].
- Tee K., ‘Muhyiddin got RM1.3m from UKSB in 2018 after GE14, witness says in Zahid’s corruption trial’, MalayMail, 17 June 2022, https://www.malaymail.com/news/malaysia/2022/06/17/muhyiddin-got-rm13m-from-uksb-in-2018-after-ge14-witness-says-in-zahids-corruption-trial/12812 [accessed on the 22/11/22]
- H. Rodzi N., ‘Truth has prevailed, says Malaysia’s ex-DPM Zahid after acquittal over bribery charges’, The Straights Times, 23 September 2022, https://www.straitstimes.com/asia/se-asia/umno-chief-zahid-acquitted-of-bribery-charges [accessed on the 22/11/22]
- Asia / Pacific Group on Money Laundering, Members, http://www.apgml.org/members-and-observers/members/default.aspx [accessed on the 03/09/20].
- https://www.fatf-gafi.org/countries/#Malaysia [accessed on the 14/11/22].
- https://www.fatf-gafi.org/pages/asiapacificgrouponmoneylaunderingapg.html [accessed on the 03/09/20].
- Financial Action Task Force, Anti-money laundering and counter-terrorist financing measures – Malaysia Mutual Evaluation Report, September 2015, p. 12
- FATF, Malaysia’s progress in strengthening measures to tackle money laundering and terrorist financing, 31 October 2018, http://www.fatf-gafi.org/countries/j-m/malaysia/documents/fur-malaysia-2018.html [accessed on the 03/09/20].