Goldman Sachs Could be in Trouble Again Over Its Malaysian Money Laundering Settlement

Goldman Sachs agreed to pay Malaysia $3.9 billion in July 2020 to settle a money laundering scheme involving its bankers, Malaysia’s new Prime Minister Anwar Ibrahim says it wasn’t enough.

In 2018, Malaysian prosecutors sued the investment bank, accusing bankers of helping to raise billions of dollars for 1Malaysia Development Berhad, known as 1MDB. The funds were part of an international money laundering scheme involving major financial institutions in the United States, Switzerland, Singapore, Luxembourg and others.

“We’ll have to reopen this negotiations with Goldman Sachs, because they were complicit to the crime,” Anwar, who was took office in November, said in an interview with CNBC’s Martin Soong, which will air later this week. “Unfortunately, they have not been too forthcoming. And we will therefore have no choice but to pursue this.”

Anwar added that he is considering taking more legal action against the New York-based banking giant.

“Why must I punish the people of Malaysia by having to pay half the profits made by them? I just don’t say we should negotiate. It should return,” he said. “I’m not discounting the possibility of proceeding again, the issue [of] lawsuits.”

The U.S. Department of Justice repatriated a total of $1.2 billion in misappropriated funds to the Malaysian government as of August 2021. In January 2022, the Malaysian government also recovered $80 million from Netherlands-based accounting firm KPMG.

“However, the current balance of the Trust Account is sufficient to pay off only the principal amount of the bonds for 2022,” former Finance Minister Tengku Datuk Seri Utama Zafrul Tengku Abdul Aziz said in a statement at the time. “Once all the Trust Account funds are utilised, the government will continue to bear the obligation to pay the balance of 1MDB’s debts, whose issuance was backed by a government guarantee and letter of support.”

The initial settlement was agreed upon by then-Prime Minister Muhyiddin Yassin. While Anwar said the recovery of 68% of the misappropriated funds was an “impressive feat,” he’s “not stopping at that.”

“If the parties are unable to resolve this dispute, it would be settled by arbitration,” Goldman told CNBC.

According to Goldman’s second quarter earnings report, it must pay the Malaysian government at least $1.4 billion. It was also required to make a one-time interim payment of $250 million if the Malaysian government didn’t receive $500 million from the bank by August 2022.

The two parties disagree, however, over whether Goldman paid the $500 million within that time frame.

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