Standard Chartered Bank faces $2.7bln lawsuit over alleged role in 1MDB fraud

Zawya

2 days ago

KUALA LUMPUR: Liquidators trying to recover money from Malaysia's sovereign wealth fund 1MDB have sued Standard Chartered Bank in Singapore, alleging it enabled fraud that led to more than $2.7 billion in financial losses more than 10 years ago.
Standard Chartered on Tuesday said that it emphatically rejected the claims.
The move is the latest in a wide-ranging effort to recover money belonging to 1Malaysia Development Berhad (1MDB), from which U.S. investigators say about $4.5 billion was stolen between 2009 and 2014 in a complex, globe-spanning scheme.
Shares in Standard Chartered fell on Tuesday and were down 2.7% by 1110 GMT, against a 0.3% drop in London's FTSE 100 .
Malaysian authorities have previously said there were billions of dollars more that were unaccounted for.
Liquidators from financial services firm Kroll, which filed the lawsuit in the High Court of Singapore, said in a statement on Monday they were seeking to hold Standard Chartered accountable for its role in allegedly enabling fraud to be committed against 1MDB.
Three companies in liquidation linked to 1MDB say Standard Chartered permitted over 100 intrabank transfers between 2009 and 2013 that helped conceal the flow of stolen funds.
They also allege the bank chose to overlook obvious red flags in relation to the transfer of funds, resulting in the losses, the liquidators said.
"According to this lawsuit, the transfers demonstrate serious breaches and control failings which ultimately enabled the theft of public funds by people operating at the highest levels of the Malaysian government during that period," the liquidators said.
Standard Chartered said it had not yet received the legal filing documents.
"Any claims by these companies are without merit and Standard Chartered will vigorously defend any lawsuit commenced by the liquidators," Standard Chartered said in a statement to Reuters.
It added the liquidators had earlier publicly stated the firms involved were shell companies with no legitimate business and were linked to alleged 1MDB mastermind and fugitive Low Taek Jho, also known as Jho Low. Low has consistently denied wrongdoing.
The liquidators said the funds that flowed through the Standard Chartered accounts included transfers to the personal bank account of former Malaysian Prime Minister Najib Razak, who is serving a six-year prison sentence after being convicted of graft linked to 1MDB.
The fund transfers also involved business payments and purchases of jewellery and luxury goods for Najib's wife and stepson, the liquidators said.
Najib and his family members have consistently denied wrongdoing.
The Board of 1MDB welcomed the move by the court-appointed liquidators.
"The Malaysian people were the true victims of this global fraud, and all parties are determined to hold every facilitator to account - including financial institutions that failed in their most basic duties of vigilance and responsibility," a spokesperson for the board said.
At least six countries, including Singapore and Switzerland, have launched investigations into 1MDB dealings in a global probe that has implicated banking and high-ranking officials worldwide, including Najib and executives from U.S. bank Goldman Sachs.
Malaysia said last year it had recovered a total of 29 billion ringgit ($6.92 billion) in 1MDB assets between 2019 and February 2024.
In 2016, Singapore's central bank imposed penalties of S$5.2 million on the local unit of Standard Chartered for money laundering breaches related to the 1MDB scandal.
The Monetary Authority of Singapore said its investigations into Standard Chartered revealed "significant lapses in the bank's customer due diligence measures and controls for ongoing monitoring" but did not find "wilful misconduct".
News of the lawsuit on Tuesday weakened Standard Chartered's share price.
"While it's tough to gauge the lawsuit's outcome, the potential hit - about 7% of market cap – is likely enough to weigh on shares in the short term," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
Standard Chartered is facing a separate $1.9 billion lawsuit in London over allegations the lender broke U.S. sanctions against Iran in a more widespread way than it has previously admitted. ($1 = 4.1910 ringgit) (Reporting by Rozanna Latiff; Additional reporting by Yantoultra Ngui in Singapore and Danial Azhar in Kuala Lumpur and Tommy Reggiori Wilkes in London; Editing by David Stanway, Sonali Paul and David Evans)