1MDB — set up to promote Malaysia’s development — has been at the center of one of the world’s largest corruption and money laundering scandals, as billions of dollars went missing from the fund. It tarnished Malaysia’s image as a safe place to do business in and dented foreign investors’ confidence in putting money in the country.
But Nor Shamsiah Mohd Yunus, the governor of Bank Negara Malaysia, said on Saturday the new government has taken a number of steps to prevent such financial scandals from happening again.
“One of the structural reforms that the government has introduced is to put in place a framework, a system, a culture that will eradicate corruption,” the central bank governor told CNBC’s Geoff Cutmore at the annual meeting of the World Bank and the International Monetary Fund in Washington.
She added that earlier this month, Malaysian lawmakers passed a bill to set up a national body to coordinate investigations into financial crimes. Meanwhile, the central bank is “continually strengthening the compliance culture in financial institutions so that the financial integrity of our financial system is maintained,” she said.
When CNBC asked whether she’s comfortable in thinking that such financial scandals will never happen again, Nor Shamsiah responded “yes.”
Authorities in at least six countries — including the U.S., Switzerland and Singapore — have investigated suspected wrongdoing related to 1MDB.
The U.S. Justice Department estimated that $4.5 billion was diverted from the fund and laundered through a complex web of bank accounts and shell companies across multiple countries, Reuters reported. Of that, millions of dollars allegedly ended up in former Malaysian Prime Minister Najib Razak’s personal bank account.
The scandal, which also involved U.S. investment banking giant Goldman Sachs, was believed to be responsible for the toppling of Najib’s government in Malaysia’s general elections last year. Najib, facing multiple charges on corruption and abuse of power, has denied any wrongdoing.