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Standard Chartered faces US$2.7 billion lawsuit over alleged role in 1MDB fraud; bank ‘emphatically rejects' claims
[SINGAPORE] Liquidators seeking to recoup misappropriated funds from Malaysia's sovereign wealth fund 1Malaysia Development Berhad (1MDB) have initiated legal proceedings against Standard Chartered Bank in the High Court of Singapore, they said in a statement dated Monday (Jun 30).
The lawsuit, brought by court-appointed liquidators Angela Barkhouse and Toni Shukla, seeks to hold StanChart accountable for its role in allegedly enabling fraud to be committed against 1MDB and the systematic theft of funds.
Three companies in liquidation linked to 1MDB – Alsen Chance Holdings, Blackstone Asia Real Estate Partners and Brightstone Jewellery – say financial breaches and control failings by StanChart between 2009 and 2013 led to financial losses of more than US$2.7 billion, the liquidators said.
They are seeking to hold the bank accountable for its alleged role in enabling fraud related to the multibillion-dollar financial scandal, the statement said.
In a statement to the media on Tuesday, StanChart said it has not yet received the legal claim documents, and 'emphatically rejects' any claims made by these companies.
'The liquidators who are making these claims have publicly stated that these companies were shell companies with no legitimate business and were linked to fugitives Low Taek Jho and his associate Eric Tan,' StanChart said.
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'They operated under false pretences, and acted as a conduit for funds misappropriated from 1MDB to launder monies,' the bank added. 'Any claims by these companies are without merit and StanChart will vigorously defend any lawsuit commenced by the liquidators.'
According to the claimants, StanChart between 2009 and 2013 permitted more than 100 intrabank transfers that helped conceal the flow of stolen funds and chose to overlook obvious red flags in relation to the transfer of funds.
In one example, an account held by Blackstone Asia Real Estate Partners is said to have disbursed US$150 million directly to the personal bank account of Najib Razak – the former prime minister of Malaysia who has since been jailed for corruption and money laundering.
The account also disbursed US$4.7 million to jewellery, watch and bag vendors to pay for the luxury goods purchases of Najib's wife Rosmah Mansor.
Another US$1 million was transferred from the account to Red Granite Pictures, a movie production and distribution company controlled by Riza Aziz – Rosmah's son and Najib's stepson. This was used to pay for movie development expenses, among other things.
Through such transfers, the claimants said they have lost a total of more than US$2.7 billion and S$20 million in public funds.
'According to the claimants, these amounts, along with the nature of the money flows, evidence how StanChart had failed to conduct the anti-money laundering safeguards that would have been expected of it,' the liquidators said in the statement.
StanChart noted that the transactions cited date back to 2010.
'We reported the transaction activities of these companies, both before and at the time we shut their accounts in early 2013, and fully cooperated with the investigating authorities,' the bank said in its statement.
The Monetary Authority of Singapore (MAS) in 2016 imposed financial penalties of S$5.2 million on StanChart in relation to 1MDB-related fund flows.
StanChart noted in its statement that while MAS identified regulatory breaches, the inspection did not find pervasive control weaknesses or wilful misconduct at the bank.
'StanChart takes our responsibility to fight financial crime extremely seriously,' it added. 'We have made significant investments in strengthening our controls and uplifting our anti-money laundering standards, and will continue to do so.'
A spokesperson for the board of 1MDB said: 'We are pleased to see the court-appointed liquidators taking action which will benefit the victims of the fraud, including 1MDB. 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.'
