Veteran business journalist P. Gunasegaran and his team from the now-defunct online business news portal KINIBIZ suggested in "1MDB: The Scandal That Brought Down a Government" that "Singapore figured very highly as a place from which money laundering occurred".
"1MDB: The Scandal That Brought Down a Government" is the first ever book to be written about the 1MDB fiasco.
Quoting the report by the United States' Department of Justice (DOJ) on 1MDB, the authors highlighted that funds were unlawfully diverted from "a Swiss bank account belonging to a British Virgin Islands entity called Aabar Investments PJS Limited (Aabar-BVI)" to "a Singapore bank account controlled by Tan Kim Loong" – a Malaysian national and an associate of infamous Malaysian financier Jho Low – who is also known as Eric Tan.
The portion misappropriated amounted to "approximately $1.367 billion, a sum equivalent to more than forty percent of the total net proceeds raised".
"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," charged the DOJ report.
The report highlighted that "five wire transfers totaling $636,000,000 were sent from the Aabar-BVI Swiss Account to an account at Standard Chartered Bank in Singapore held in the name of Blackstone Asia Real Estate Partners” between late-May and mid-Dec the same year.
"These wire transfers were processed through correspondent bank accounts at Standard Chartered Bank and Citibank in the United States," stated the report.
Eric Tan was also named as the "beneficial owner" and an "authorized signatory" on the Blackstone account.
Aabar Investments PJS Limited (Aabar-BVI) was created and named to give the impression that it was associated with Aabar Investments PJS (Aabar), which is a purported subsidiary of IPIC incorporated in Abu Dhabi.
"It is possible, however, to register an entity with a name that mimics the name of an existing entity, without the need to prove any relationship to the existing entity. This is a common technique to lend the entity in question an appearance of legitimacy.
"It is also possible to incorporate an entity in the BVI without providing evidence of the entity’s true beneficial ownership and without providing evidence of the relationship between the entity and the shareholder listed in the incorporation records," added the report.
However, it was revealed in the DOJ report that Aabar-BVI has "no genuine affiliation" with either Aabar or IPIC, and the Swiss bank account belonging to Aabar-BVI was used to "siphon off proceeds of the 2012 bond sales" facilitated by Goldman for the personal benefit of officials at IPIC, Aabar, and 1MDB, as well as their associates.
Funds from US$3bil third bond channelled fraudulently from Aabar-BVI into Eric Tan's Singapore bank account during "Tanore" Phase in 2013: DOJ
Only days after a third bond was raised by 1MDB – facilitated by Goldman Sachs International in Mar the following year – 1MDB official and other individuals "diverted more than $1.26 billion out of a total of $3 billion in principal".
Eric Tan's involvement was again seen in this phase, with a "significant portion of the proceeds" being "diverted to a bank account in Singapore held by Tanore Finance Corporation", of which he was the "beneficial owner".
"Although the Tanore Account had no legitimate connection to 1MDB, the then-Executive Director of 1MDB, Jasmine Loo Ai Swan was an authorized signatory on the account," noted the DOJ report.
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), it added.
However, "1MDB funds transferred into the Tanore Account were", instead, "used for the personal benefit of LOW and his associates, including officials at 1MDB, rather than for the benefit of 1MDB or ADMIC".
Proceeds from two loans taken by 1MDB from Deutsche Bank also channelled into Singapore-based accounts such as Jho Low's Good Star and Eric Tan's Blackstone
Quoting the DOJ report, P Gunasegaram and his team noted that "1MDB officials had secured approval of the two loans" – namely the two loans taken by the state fund from Deutsche Bank amounting to US$1.225 billion under the Options Buyback Phase – through "misrepresentations and omissions" to the Bank.
"The Good Star account, the Blackstone account (into which the Aabar-BVI misappropriated funds were transferred), and the Tanore Finance account were all [based] in Singapore," stated the authors.
The DOJ reported that "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, a/k/a Jho Low (“LOW”), a Malaysian national who had no formal position with 1MDB, but who was involved in its creation and exercised significant control over its dealings".
Jho Low had reportedly "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 "personal gratification" and that of his associates, added the DOJ.
Money flow "not consistent" with what is usually classified as "regular business activity"; "frequent use of currency exchange brokers" point to money laundering activities - possible "oversight" on the part of Singapore authorities?
The DOJ report also highlighted that "between approximately Jul 2011 and Feb 2013, twenty wires were sent from the Blackstone Account to Raffles Cash Exchange, totaling approximately $12,800,000".
The report then raised the question regarding the flow of money into and out of the account, which it argued "is not consistent with what can reasonably be characterized as regular business activity".
"For example, the account did not have the types of debits and credits consistent with legitimate business activity, including, for example, transfers to vendors, payroll, or receipt of proceeds from customers," it said.
"Frequent use of currency exchange brokers, especially for large sums and where the entity already maintains an account at a major bank capable of processing currency exchanges, is a technique commonly used by individuals engaged in money laundering and other unlawful conduct to move money in a way that is less likely to be traced by law enforcement and regulatory officials," it argued.
Given the stringent approach often adopted by Singapore authorities –– particularly relevant to this case is the Monetary Authority of Singapore (MAS) –– in dealing with legal misconduct, it certainly raises some questions as to why potentially illegal financial movements on such a scale did not seem to have raised any red flags for the authorities at the time the activities were carried out.