It is suspected that a ‘Ponzi‘ scheme fraud was committed to conceal the misappropriations from both the SRC fund and 1MDB, says the Office of the Attorney General of Switzerland.
Following the request it made in January 2016, the Office of the Attorney General of Switzerland (OAG) has again requested mutual legal assistance from the Malaysian authorities.
The request comes as part of the criminal proceedings opened in August 2015 in relation to the Malaysian sovereign fund 1MDB (1Malaysia Development Berhad). Investigations have revealed that substantial amounts were misappropriated from the SRC sovereign fund and that fraud was committed based on a form of ‘Ponzi’ scheme.
On analysing the evidence obtained, the OAG identified further suspect transactions involving the Swiss financial sector.
Firstly, the sum of US$800m appears to have been misappropriated from investments in natural resources made by the SRC sovereign fund.
Secondly, it is suspected that a ‘Ponzi‘ scheme fraud (i.e. paying the returns on initial investments from funds obtained from subsequent investors rather than from legitimate revenue from the investments) was committed to conceal the misappropriations from both the SRC fund and from 1MDB.
These suspected misappropriations from 1MDB were the subject of the OAG’s first request for mutual legal assistance to the Malaysian authorities.
The aim of the OAG’s latest request is therefore to obtain further evidence in corroboration of the latest findings, in addition to the assistance requested in the OAG’s initial request of January 2016, which is still pending. The OAG has also requested assistance from the Malaysian authorities so that the presumed companies/persons suffering harm can assert their rights in the Swiss criminal proceedings.
Based on these new suspicions, the OAG has also addressed an additional request for mutual legal assistance to Singapore, following an earlier request made in April 2016.
Status of the proceedings
On 14 August 2015, the OAG opened proceedings against two former officials at 1MDB and against persons unknown on suspicion of bribery of foreign public officials (Art. 322septies Swiss Criminal Code, SCC), misconduct in public office (Art. 314 SCC), money laundering (Art. 305bis SCC) and criminal mismanagement (Art. 158 SCC).
The investigation was extended in April 2016 to include two former officials from the United Arab Emirates who had been in charge of Abu Dhabi sovereign funds. They are suspected of committing fraud (Art. 146 SCC), criminal mismanagement (Art. 158 SCC), misconduct in public office (Art .314 SCC), forgery of documents (Art. 251 SCC), bribery of foreign public officials (Art. 322septies SCC) and money laundering (Art. 305bis SCC).
The criminal proceedings being conducted by the OAG focus primarily on misappropriation from the 1MDB sovereign fund of monies intended for investment in the PetroSaudi, Tangjong/Genting and ADMIC projects, as well as the misappropriation of investments in the SRC sovereign fund in the area of natural resources.
In May 2016, following the decision in enforcement proceedings brought by the Swiss Financial Market Supervisory Authority Finma, the OAG opened criminal proceedings against the BSI SA bank related to suspected deficiencies in the bank’s internal organisation. It is believed that, due to these deficiencies, the bank was unable to prevent the commission of offences currently under investigation.
At this stage of the criminal proceedings in connection with the Malaysian sovereign funds 1MDB and SRC, four persons and one bank are under investigation.
In addition, the OAG has confirmed receipt, to its full satisfaction, of the evidence requested in April 2016 from the authorities in Singapore via mutual legal assistance. The OAG remains confident that the two requests for mutual legal assistance made to the authorities in Malaysia will be executed.
The OAG is unable to provide any additional information at present and will not respond to any further enquiries, whether written or by telephone.