opinion

Friends may turn foe as 1MDB probe unveils embarrassing connections

Julia Yeow

When Swiss authorities weighed in on the 1Malaysia Development Berhad (1MDB) investigations last week by openly requesting cooperation from Malaysia, Singapore and the United States, the scandal was no longer just a Malaysian joke.

It suddenly also became an embarrassing association for our southern neighbours, casting unwanted attention on Singapore's monetary policies and practices in the glitzy world of wealth management.

Singapore is currently ranked the fourth largest offshore banking centre in the world, with an estimated US$450 billion belonging to offshore clients.

Often dubbed the Switzerland of Asia, the tiny republic has even bigger ambitions – to become the world leader in wealth management, an industry as notorious for its tight privacy and confidentiality practices, as it is for whispers of money laundering and illegal activity.

Being a country that prides itself on its squeaky clean image, the Monetary Authority of Singapore (MAS) has over the past few years strengthened regulations and forced banks to tighten checks on clients, all to send a message that it was serious in its fight against cross-border illicit funds.

This message, however, was put to doubt when the country’s banking system was linked to the highly-toxic 1MDB controversy.

Prime Minister Datuk Seri Najib Razak had revealed last year that billions in 1MDB funds were being kept in Swiss private bank BSI in Singapore, and reports had also surfaced later that the RM2.6 billion which he received as a “donation” had been transferred into his personal bank account from another bank in Singapore.

It's image slightly bruised by the association, Singapore launched investigations and froze six bank accounts, but had still remained largely coy on its 1MDB-related findings.

It finally took the Swiss authorities’ public announcement last week to jolt the normally-reticent Singapore out of its diplomatic niceties, forcing its hand to aggressively set itself apart from the 1MDB scandal.

In true Singaporean fashion, the authorities’ actions in the past week have been swift. The MAS announced quickly that it has seized a large number of bank accounts, and already one private banker has been named for possible wrongdoing. More legal action against other parties implicated in the scandal is expected to come.

The high-profile international investigation on 1MDB has put at risk not only Singapore’s straight-laced reputation, but – perhaps more importantly – the billions of dollars from its offshore clients who could at any one time be spooked by all of the unwanted attention, and take their money elsewhere.

And when their money and reputation is at stake, diplomatic goodwill will have to take a back seat as Singapore scrambles to clear itself of any damaging association with the embezzlement of billions of dollars from Malaysia's public coffers. 

“Najib has always been a good partner to Singapore, but when our reputation, financial health or international standing is threatened, it’s a friendship that will very quickly fade,” said a former top Singaporean civil servant.

In Malaysia, there may be little hope among even the most optimistic that our legal and judiciary system is able to prosecute those who are responsible for the billions in losses incurred by 1MDB.

But for those who have been calling for justice and truth, it might yet be too premature to concede defeat.

The heat has been turned up on the money trail surrounding 1MDB's funds, and once-friendly countries are finding themselves caught up in the convoluted maze of dubious companies and unregulated transfers. 

From Saudi Arabia to Singapore, friendships will give way to pragmatism and the noose of international investigations will inevitably tighten around the guilty parties here in Malaysia.

And hopefully, as more dirt and evidence is uncovered, the miserable blemish that is the 1MDB scandal will finally be put to rest. – February 7, 2016.

* This is the personal opinion of the writer, organisation or publication and does not necessarily represent the views of The Malaysian Insider.