The US Department of Justice has made civil (but no criminal) complaints seeking the forfeiture and recovery of more than $1 billion in assets associated with an international conspiracy to launder funds misappropriated from 1MDB.

The complaints represent the largest single action ever begun under the US Government's hilariously entitled "Kleptocracy Asset Recovery Initiative." The DoJ alleges that between 2009 and 2015 more than $3.5 billion in funds belonging to 1Malaysia Development Berhad was misappropriated by high-level officials of 1MDB and their associates, of which more than $1 billion was laundered through the United States and was traceable to the conspiracy. The Government of Malaysia created 1MDB 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 at large.  Instead, 1MDB officials and their associates allegedly misappropriated more than $3 billion.

The complaints are partly a result of a six-month investigation by the Federal Bureau of Investigation. Nowhere in the complaints does the DoJ mention the name of the embattled Malaysian prime minister, Najib Razak.

Behind the silver screen

The associates of these corrupt officials are alleged to have used some of their ill-gotten gains to fund the production of "The Wolf of Wall Street," a film about financial fraud starring Lenoardo di Caprio. Stolen money that people use to purchase interests in music companies, masterpieces by Van Gogh and Monet or real estate - which also seems to have been the case - is subject to forfeiture under US law, and under a far less onerous burden of proof (the civil-law 'balance of probabilities') than for a criminal case (which demands 'proof beyond reasonable doubt'). This intrusion of civil law into money-laundering cases is, however, an obvious governmental manoeuvre to punish money-launderers without having to prove their guilt, while also making some money for the State, as evidenced by the fact that the 'kleptocracy initiative' is actually the responsibility of the DoJ's criminal division.

The Sarawak Report

Malaysia, meanwhile, has been doing its best to stop its compliance officers from reading about the scandal, albeit in a slightly less aggressive way than the Chinese Government's heavy-handed attempts to block access to websites that discuss the Panama Papers. The Government in Kuala Lumpur is making sure that nobody in Malaysia can see the Sarawak Report, founded by Sarawak-born investigative journalist Clare Rewcastle-Brown in 2010, which describes itself as a "champion against censorship." Just after it reported on 1MDB in May 2015, the Malaysian Government asked Interpol to place Ms Rewcastle-Brown on its 'red list,' which is full of the names of people suspected of terrorism.

Here, then, for the benefit of Malaysian compliance officers, are the contents of the US Government (actually the FBI) writ against the "Wolf of Wall Street" motion picture (filed in the US District Court for central California on 20th July, pursuant to 18 USC s981(a)(1)(A) and (C), no CV 16-16-5362) which contains the data that the Sarawak Report sums up in a big diagram on its front page.

The three phases of a scam

The criminal conduct allegedly occurred in three principal phases:

1. The 'Good Star' phase. This entailed the fraudulent diversion of funds from 1MDB that began in approximately September 2009, soon after 1MDB’s creation. Between 2009 and 2011, under the pretence of investing in a joint venture between 1MDB and PetroSaudi International (PSI), a private Saudi oil extraction company, officials of 1MDB and others arranged for the fraudulent transfer of more than $1 billion from 1MDB to a Swiss bank account held in the name of Good Star Limited. Officials at 1MDB caused this diversion of funds by, among other things, providing false information to banks about the ownership of the Good Star account. Contrary to representations made by 1MDB officials, the Good Star account was beneficially owned not by PetroSaudi or the joint venture, but by LOW Taek Jho, aka Jho Low, a Malaysian who had no formal position with 1MDB but was involved in its creation. Low laundered more than $400 million of the funds misappropriated from 1MDB through the Good Star account into the United States, after which these funds were used for his and his friends' personal gratification.

2. The 'Aabar-BVI' phase. In 2012, 1MDB officials and others misappropriated and fraudulently diverted a substantial portion of the proceeds that 1MDB raised through two separate bond offerings arranged and underwritten by Goldman Sachs International. The bonds were guaranteed by both 1MDB and the International Petroleum Investment Company (IPIC), an investment fund wholly-owned by the government of Abu Dhabi in the United Arab Emirates. Beginning almost immediately after 1MDB received the proceeds of each of these two bond issues, 1MDB officials caused a substantial portion of the proceeds – approximately $1.367 billion, a sum equivalent to more than forty percent of the total net proceeds raised – to be transferred by wire to a Swiss bank account belonging to a British Virgin Islands entity called Aabar Investments PJS Ltd.

Aabar-BVI, as it is known, was created and named to give the impression that it was associated with Aabar Investments PJS, a subsidiary of IPIC incorporated in Abu Dhabi. In reality, Aabar-BVI has no genuine affiliation with the real Aabar or IPIC, and the Swiss bank account belonging to Aabar-BVI was used to siphon off proceeds of the 2012 bond sales for the personal benefit of officials at IPIC, Aabar, and 1MDB and their associates. Funds diverted through the Aabar-BVI Swiss Account were transferred to, among other places, a Singapore bank account controlled by TAN Kim Loong, aka Eric Tan, one of Low's associates. Those funds were thereafter distributed for the personal benefit of various individuals, including officials at 1MDB, IPIC, or Aabar, rather than for the benefit of 1MDB, IPIC, or Aabar.

3. The 'Tanore' phase. In 2013, several individuals, including 1MDB officials, diverted more than $1.26 billion out of a total of $3 billion in principal that 1MDB raised through a third bond offering arranged by Goldman in March 2013. The proceeds of this bond offering were to be used by 1MDB to fund a joint venture with Aabar known as the Abu Dhabi Malaysia Investment Company (ADMIC). However, beginning days after the bond sale, a significant portion of the proceeds was instead diverted to a bank account in Singapore held by Tanore Finance Corporation, for which Tan was the recorded beneficial owner. Although the Tanore account had no legitimate connection to 1MDB, the executive director of 1MDB at the time was an authorised signatory on the account. 1MDB funds transferred into the Tanore account were used for the personal benefit of Low and his associates, including officials at 1MDB, rather than for the benefit of 1MDB or ADMIC.

The proceeds of each of these three phases of criminal conduct were laundered through a complex series of transactions that went, inter alia, through bank accounts in Singapore, Switzerland, Luxembourg and the United States.

The "Wolf of Wall Street motion picture" is described in court documents as a defendant asset, allegedly derived from money laundering in breach of 18 USC ss1956 and 1957, the part of the US Criminal Code that contains the Bank Secrecy Act 1970, the Money Laundering Control Act 1986, Title III USA PATRIOT Act 2001 (which begins at s300 for the benefit of America's rather byzantine system of codification) and all other money-laundering statutes.