KUALA LUMPUR, June 19 — The 1Malaysia Development Berhad (1MDB) financial scandal mustn’t happen again, Bank Negara Malaysia’s new governor Datuk Nor Shamsiah Mohd Yunus has said.
Close to a year since she was appointed as the central bank’s governor, Nor Shamsiah was asked what safeguards were required to prevent another 1MDB from occurring again.
In response, Nor Shamsiah was quoted by newswire Bloomberg as saying yesterday: “We cannot allow another 1MDB event to recur. This 1MDB affair has put a spotlight not just on Malaysia but also on banks in a number of other countries. And that is why we have the Financial Action Task Force (FATF) recommendations.
“In countries that are assessed against that raft of recommendations, FATF wants to see the areas of improvement a country needs to undertake in order to strengthen controls against money laundering. You should read the report on Malaysia and the report of other countries. Most authorities have taken action against their regulatees.
“It was a useful exercise for us because we did recognise that while we have a good preventive framework, there are areas that we need to strengthen. These include controls and governance in the banks as well as the prosecution system in Malaysia that needs to target more high-risk crimes.”
The FATF, which Nor Shamsiah referred to, is an inter-governmental policy-making body which aims to set standards and to “promote effective implementation of legal, regulatory and operational measures” to combat threats to the international financial system, such as money laundering and terrorist financing.
Nor Shamsiah reportedly aired her comments in her first formal interview with international news agencies since becoming BNM governor.
Nor Shamsiah was last year appointed as the central bank’s governor from July 1, 2018 to June 30, 2023.
On June 15, Nor Shamsiah was reported by local daily The Star to have said that the 1MDB episode also highlights the existing practices of financial institutions in other countries.
“One can even say that Malaysia was a victim because the other banking institutions involved also did not implement the necessary controls to mitigate the risks of them being used as a conduit to launder money,” she was quoted saying then.
She noted that BNM is supportive of “critical institutional reforms” carried out post-1MDB and is taking steps to strengthen its commitment to financial integrity.
In The Star report, Nor Shamsiah was quoted saying that Malaysia was last assessed in 2015 by FATF, which had identified the investigation and prosecution of high-risk crimes such as smuggling, drug trafficking and corruption, as a key area for improvement.
Nor Shamsiah, who was reportedly spearheading investigations into 1MDB when she was deputy governor at BNM, left the bank in late 2016 and had taken up a post with the International Monetary Fund before her return last July to the central bank.
Last May, a new special task force that included Bank Negara personnel was formed to investigate 1MDB.
Last August, Nor Shamsiah revealed that BNM had previously fined the debt-ridden 1MDB RM15 million at the time it “was allowed to do so”, noting that the central bank was in the past barred from disclosing the fine amount.
BNM had in April 2016 issued a fine against 1MDB via a letter of administrative compound to 1MDB for failure to fully comply with directions issued under the Financial Services Act 2013.
The 1MDB scandal which is said to have involved money laundering activities across the globe has plagued the Najib administration, which was also viewed by critics as having sought to hamper or shut down investigations into the financial scandal alleged to have caused massive losses to Malaysia.
Following the change in government last May, investigation efforts by Malaysian authorities have led to prominent individuals being charged in court in cases tied to the 1MDB controversy.
In the same interview yesterday reported by Bloomberg, Nor Shamsiah was also asked regarding BNM’s view on digital and crypto-currencies.
Nor Shamsiah noted that there has been a dramatic increase in the use of e-payments in Malaysia while the use of cheques has dropped.
“There is no compelling need to introduce cryptocurrencies,” she was quoted saying, adding that BNM is collaborating with the Securities Commission to regulate crypto-assets and that the latter is the primary regulator for digital exchanges.