Cutting The 1MDB Gordian Knot: Powers Of Forfeiture Under The Anti-Money Laundering And Anti-Terrorism Financing Act 2001 (“AMLATFA”)

Of late, it is refreshing to see 93 year old Tun Dr Mahathir making nimble and brilliant moves to bring back into Malaysia and seize assets linked to the 1MDB fiasco. Otherwise, such assets will languish in foreign jurisdictions while court proceedings are challenged, appeal after appeal.

One of the most powerful tools available to the Malaysian government is the power of forfeiture where there is no prosecution under Section 56 of AMLATFA.

The Public Prosecutor may, before the expiry of 12 months from the date of seizure, or where there is a freezing order, 12 months from the date of freezing, apply to a judge of the Malaysian High Court for an order of forfeiture of any property seized under the Act if he is satisfied that such property is the subject-matter or evidence relating to the commission of a money laundering offence or the proceeds of an unlawful activity or the instrumentalities of an offence.

The judge shall make an order for forfeiture if he is satisfied that the property is (a) the subject-matter or evidence relating to the commission of a money laundering offence or (b) the proceeds of an unlawful activity or (c) the instrumentalities of an offence; and there is no purchaser in good faith for valuable consideration in respect of the property. In making its decision, the Malaysian High Court shall apply the standard of proof required in civil proceedings, i.e on a balance of probabilities.

Essentially, Section 56 empowers the court to forfeit the property even where the offence of money laundering is not proven when the court is satisfied that the property is say, the proceeds of an unlawful activity and no other person is entitled to the property as a purchaser in good faith for valuable consideration.

In its Press Release of 15 June 2017, the Justice Department of the United States (US DOJ) announced the filing of civil forfeiture complaints seeking the forfeiture and recovery of approximately $540 million in assets associated with an international conspiracy to launder funds misappropriated from 1MDB stating:

“The complaints filed today allege that in 2014, the co-conspirators misappropriated approximately $850 million in 1MDB funds under the guise of repurchasing certain options that had been given in connection with a guarantee of 2012 bonds. As the complaints allege, 1MDB had borrowed a total of $1.225 billion from a syndicate of banks to fund the buy-back of the options. The complaints allege that approximately $850 million was instead diverted to several offshore shell entities. From there, the complaints allege, the funds stolen in 2014, in addition to money stolen in prior years, were used, among other things, to purchase a 300 foot luxury yacht valued at over $260 million, certain movie rights, high-end properties, tens of millions of dollars of jewelry, and artwork. A portion of the diverted loan proceeds were also allegedly used in an elaborate, Ponzi-like scheme to create the false appearance that an earlier 1MDB investment had been profitable.

As alleged in the earlier complaints, in 2009, 1MDB officials and their associates embezzled approximately $1 billion that was supposed to be invested to exploit energy concessions purportedly owned by a foreign partner. Instead, the funds were transferred through shell companies and were used to acquire a number of assets, as set forth in the complaints. The complaints also allege that the co-conspirators misappropriated close to $1.4 billion in funds raised through the bond offerings in 2012, and more than $1.2 billion following another bond offering in 2013.”

See https://www.justice.gov/opa/pr/us-seeks-recover-approximately-540-million-obtained-corruption-involving-malaysian-sovereign

Much work has been done by the US DOJ and other enforcement agencies in Singapore and Switzerland over several years, all of whom are cooperating and providing Malaysian investigators with evidence and other assistance.

To satisfy the requirements of Section 56 on a balance of probabilities is most likely easier than proving 1MDB’s ownership of those assets on the basis that its funds were used to purchase them.

Rather than chasing the culprits all over the world, it is easier for Malaysia to wait for them to come home and claim ownership of the assets seized. Those who are innocent and are rightful owners have nothing to fear. While back home, they are also most welcome to answer the question the whole world is asking – where did 1MDB’s missing billions go?

Like Alexander the Great and the legend of the Gordian Knot, may Tun Dr Mahathir be long remembered in the years to come for his greatness in cutting the 1MDB Gordian Knot.