1MDB Scandal: Hong Kong Fines Goldman Sachs $350 Million

Hong Kong’s Securities and Futures Commission (SFC) has reprimanded and fined Goldman Sachs (Asia) LLC, the Asian division of the New York-headquartered investment bank, $350 million for its involvement in the 1Malaysia Development Berhad (1MDB) scandal.

This came only days after the reports of a massive $2 billion fine by the United States’ Department of Justice on the investment bank for the lapses on the same multi-billion-dollar scandal.

As Finance Magnates explained earlier, the scandal involved the misappropriation of $2.6 billion from the $6.5 billion raised by the state-fund. It involved wrong-doings by close aides of former Malaysian prime minister, Najib Razak, which created a massive stir in the country’s domestic politics.

Goldman Sachs was at the center of the scandal as it helped the fund in three bond offerings in 2012 and 2013. The bank generated $567 million as commissions from these offerings.

The Hong Kong regulator pointed out the serious lapses and deficiencies in its management supervisory, risk, compliance, and anti-Money Laundering Money Laundering Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laund Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laund Read this Term controls that led to the misappropriation.

Additionally, the Asian division of the investment bank had ‘significant involvement in the origination, approval, Execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term, and sales process’ in the offerings and received $210 million from the commissions.

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“The penalty in this case – assessed solely in accordance with Hong Kong’s own fining framework – reflects our findings that Goldman Sachs Asia failed to deal properly with numerous suspicious circumstances surrounding the 1MDB bond offerings,” SFC CEO, Ashley Alder said.

Paying Billions in Fines

Earlier, Goldman Sachs settled with the prosecutors in Malaysia, paying a fine of $2.5 billion, and is also in talks with the authorities in Singapore. The bank is avoiding criminal proceedings in the countries by paying the fines.

“Goldman Sachs Asia fell far short of the standards expected of a licensed intermediary in the 1MDB case and suffered not only reputational damage from its own failures, but also brought the securities industry into disrepute,” Thomas Atkinson, the SFC’s executive director of enforcement, added.