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Malaysia Corruption

In 1981 Mahathir Mohamad became prime minister, and his early years in office were marked primarily by attempts to prevent official corruption. In 1998 Minister of Finance Anwar Ibrahim Anwar was arrested and eventually prosecuted for alleged sodomy and corruption, although many observers suggested that these developments were politically motivated. In 2004 the sodomy charged was overturned. Mahathir retired in October 2003 and was succeeded by Abdullah Ahmad Badawi, who subsequently pursued policies that were often at odds with Mahathir’s previous policies. Whereas Mahathir was criticized for corruption and cronyism, Abdullah engaged in substantial anticorruption efforts and terminated many government-funded projects that were administered by Mahathir’s associates.

Prime Minister Najib Razak launched 1Malaysia Development Berhad [1MDB] soon after taking office in 2009. The 1MDB fund was set up to pay for major new economic and social developments in Malaysia. A Swiss investigation into 1MDB was opened in 2015, citing "suspected corruption of public foreign officials, dishonest management of public interests and money laundering". By Januryar 2016 four cases involving allegations of criminal conduct and covering the period from 2009 to 2013 had come to light in this connection (relating to Petrosaudi, SRC, Genting/ Tanjong and ADMIC), each involving a systematic course of action carried out by means of complex financial structures. Some of the money had been transferred to Swiss accounts held by Malaysian former public officials and current and former public officials from the United Arab Emirates.

In July 2015, Malaysia's then-Attorney General Abdul Gani Patail linked a donation of $600 million made to Najib's account with companies and bodies which had ties to 1MDB. Patail was replaced, and, after an investigation, his successor in January 2016 cleared Najib of corruption saying that the money was a personal donation by the Saudi royal family to the prime minister's private bank account. Most of the money was later returned.

Responding to the Malaysian AG Mohammed Apandi’s surprise announcement that Najib had been “cleared” of any wrongdoing by the Malaysian Anti-Corruption Commission investigation, the Swiss Attorney General Michael Laubersaid issued a media statement on 29 January 2016. "The sum suspected to have been misappropriated amounts to around USD 4 billion... So far it has been ascertained that a small portion of the money was transferred to accounts held in Switzerland by various former Malaysian public officials and both former and current public officials from the United Arabic Emirates ... the Malaysian companies concerned have made no comment on the losses they are believed to have incurred."

Malaysia ranked in 54th place in Transparency International’s Corruption Perception Index in 2012 (the lower the ranking, the less perceived corruption). The Malaysian government has taken steps to address corruption, including through the establishment of the Malaysian Anti-Corruption Commission (MACC) in 2008, passage of legislation to make judicial appointments more transparent (the Judicial Appointments Commission Act) also in 2008, passage of a Whistleblower Protection Act in 2010, the introduction of procurement reforms and the launch of government initiatives to target corrupt practices. The Malaysian government considers bribery a criminal act and does not permit bribes to be deducted from taxes. Malaysia’s anti-corruption law includes the criminal offense of bribery of foreign public officials, permits the prosecution of Malaysians for offense committed overseas, and also provides for the seizure of properties.

Critics have questioned the MACC’s ability to effectively address high-level corruption, although a number of cases are in court. The MACC conducts investigations but prosecutorial discretion remains with the Attorney General. A lack of capacity and technical skills in some areas hampers MACC’s overall effectiveness. The MACC introduced a public database of those convicted of corruption offenses. There is no systematic public disclosure of assets by senior officials. Critics also note that the Whistleblower Act does not protect those who disclose allegations to the media.

Government officials cite a four point approach to reducing corruption in government procurement, a key area of focus: increasing the number and decreasing the size of government procurement contract subject to open tenders, introducing the Transparency International “Integrity Pact” concept to be signed by all vendors that they understand bidding rules and anti-corruption laws prior to engaging in contract negotiations, issuing rules against Ministerial “referral letters” recommending specific contractors for government contracts, and fully implementing the new Whistleblower Act.

The media reported numerous cases of alleged official corruption, and there was a broadly held perception of widespread corruption and cronyism within the governing coalition and in government institutions. On June 13, the newspaper The Star reported that MACC had arrested 442 people from April 2010 to March 2011 for attempts to bribe enforcement officers. On 23 August 2011, MACC reported that it had arrested 46 people in Penang from January to July, with 20 of those suspected of having accepted bribes. On 27 June 2011, MACC reported that it had made 944 arrests in 2010, representing an 88.8 percent increase over 2009.

On 06 April 2011, Selangor Customs Officer Ahmad Sarbaini Mohamed was found dead on the first-floor badminton court of the Malaysia Anticorruption Commission (MACC) office. Sarbaini had been called in by MACC in connection with investigations into corruption cases involving customs officers. On September 26, the coroner’s court ruled that the death was accidental and the result of a “misadventure.” The coroner speculated that Sarbaini was worried that he would be arrested, tried to exit via the window, lost his footing on the ledge, and fell to his death.

On 15 September 2011, the Putrajaya Sessions Court transferred the case of former transport minister Chan Kong Choy to the Kuala Lumpur High Court. As a member of former prime minister Abdullah Ahmad Badawi’s cabinet, Chan was charged with deceiving Badawi into approving Kuala Dimensi Sdn Bhd as the turnkey developer for the Port Klang Free Zone mega-transshipment hub project. Chan’s predecessor was also charged with deception, and four other prominent figures were charged with various offenses for their involvement in the project, including criminal breach of trust and fraudulent claims.

On 21 September 2011, Inspector-General of Police Ismail Omar confirmed the arrest of three senior MACC officers in connection with a RM1 million ($316,000) extortion and robbery case. On 23 December 2011, the High Court found Mohamed Khir Toyo, a former UMNO chief minister of Selangor, guilty of graft for illegally obtaining for himself and his wife two plots of land.

MACC is responsible for investigating and prosecuting corruption by both private and public bodies. Civil servants who refused or failed to declare their assets faced disciplinary actions and were ineligible for promotion. The Whistleblower Protection Act 2010 is designed to protect individuals who disclose information on corrupt practices in both the public and private sectors. The act states that anyone who has evidence of someone who has committed a corrupt practice, act, or fraudulent activity can file a complaint against that individual and refer the case to court. The whistleblower would be provided immunity from civil or criminal charges.

In corruption investigations, after a senior police official involved in the investigation submits a written application, the law empowers a deputy public prosecutor to authorize interception of any messages sent or received by a suspect. Information obtained in this way is admissible as evidence in a corruption trial. Security forces have broad authority to install surreptitious surveillance devices on private property. In addition, public prosecutors may authorize police to intercept postal and telecommunications messages if a prosecutor judges these likely to contain information regarding a terrorist offense. Intercepted communications from such efforts are admissible in court.

The anticorruption commission made several significant arrests in 2014, including the September detention of a dozen customs agency officers who had conspired to evade more than RM1 billion ($306 million) in taxes. The Attorney General’s Chambers, however, was criticized for its inaction in certain anticorruption cases, including one involving a former ruling party UMNO official who was accused of misappropriating RM1.1 million ($336,000) from a government antipoverty program.

Attorney General Loretta E. Lynch announced 20 July 2016 the filing of civil forfeiture complaints seeking the forfeiture and recovery of more than $1 billion in assets associated with an international conspiracy to launder funds misappropriated from a Malaysian sovereign wealth fund. This complaints represented the largest single action ever brought under the Kleptocracy Asset Recovery Initiative.

According to the complaints, from 2009 through 2015, more than $3.5 billion in funds belonging to 1Malaysia Development Berhad (1MDB) was allegedly misappropriated by high-level officials of 1MDB and their associates. With today’s complaints, the United States seeks to recover more than $1 billion laundered through the United States and traceable to the conspiracy. 1MDB was created by the government of Malaysia to promote economic development in Malaysia through global partnerships and foreign direct investment, and its funds were intended to be used for improving the well-being of the Malaysian people. Instead, as detailed in the complaints, 1MDB officials and their associates allegedly misappropriated more than $3 billion.

Funds that were intended to grow the Malaysian economy and support the Malaysian people were stolen, laundered through American financial institutions and used to enrich a few officials and their associates. “According to the allegations in the complaints, this is a case where life imitated art,” said Assistant Attorney General Caldwell. “The associates of these corrupt 1MDB officials are alleged to have used some of the illicit proceeds of their fraud scheme to fund the production of The Wolf of Wall Street, a movie about a corrupt stockbroker who tried to hide his own illicit profits in a perceived foreign safe haven."



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Page last modified: 22-07-2016 20:26:32 ZULU