Investigators in the US are trying to work out whether Goldman Sachs breached federal law when it failed to raise the alarm over an unusual transaction in Malaysia, the Wall Street Journal (WSJ) reported today (7 June).
The probe centres around $3bn (£2bn, €2.6bn) raised by the bank via a bond issue for Malaysia's embattled state fund, 1Malaysia Development Berhad (1MDB). The money was then transferred to the Singaporean arm of BSI, a small Swiss private bank, and half of it disappeared offshore while a portion also allegedly surfaced in Prime Minister Najib Razak's bank account, WSJ said, citing people familiar with the matter and bank transfer information that it had seen.
The investigation revolves around whether Goldman Sachs complied with the US Bank Secrecy Act, the key anti-money laundering law which requires financial institutions to "effectively identify and report suspicious activity".
The money had been earmarked for a big real-estate project in the Malaysian capital, Kuala Lumpur, in an effort to bolster the economy.
Goldman Sachs has not faced accusations of wrongdoing and it claims it had no way of knowing how the money would be used. But investigators believe the bank may have had grounds to suspect that the funds were being diverted away from their specific purpose.
Last month, The Monetary Authority of Singapore (MAS) ordered the closure of BSI operations in the city-state due to "serious breaches of anti-money laundering requirements, poor management oversight of the bank's operations, and gross misconduct by some of the bank's staff". While Singaporean authorities made no mention of 1MDB, Swiss officials said it was related to the probe into the fund.