Malaysia's Central Bank Defies AG, says there's a 1MDB Case

In a stunning development, Malaysia’s central bank has issued a statement saying it had requested a criminal investigation into the affairs of the scandal-plagued 1Malaysia Development Bhd despite the fact that Prime Minister Najib Razak's hand-picked Attorney General Mohamad Ali, to whom it had forwarded the case , said there was no reason for prosecution.

Najib fired the previous attorney general, Abdul Gani Patail, in September and replaced him with Ali, a former federal court judge, at the last minute after Gani reportedly had drawn up criminal charges against Najib and another unnamed official over the MDB scandal. Apandi Ali is considered a United Malays National Organization loyalist. Apandi's most significant ruling on the country's highest bench, before he retired, was to say that Christians, particularly Catholics, would not be allowed to use the word 'Allah" to denote god in their literature and services.

“As an investigative authority, the bank is duty bound to conduct its investigations with the highest professional care and diligence,” according to the Bank Negara statement. “The bank at all times expects full and accurate disclosure of information by applicants in considering any application under the ECA. On its part, the bank concluded that permissions required under the ECA for 1MDB's investments abroad were obtained based on inaccurate or without complete disclosure of material information relevant to the Bank's assessment of 1MDB's applications.”

Zeti Akhtar Aziz, the central bank governor, had delayed announcement of the results of the banking transactions by 1MB for several weeks. Sources in Kuala Lumpur said Zeti, one of the world’s most respected central bankers, was in essence blackmailed by forces aligned with Najib into previously burying the investigation over concerns that the government might prosecute her husband, Tawfik Ayman, because of secret overseas accounts. Rosmah Mansor, the prime minister’s wife, was reportedly involved in a campaign to drive Zeti from her position.

"I think it is the endgame," said a well-connected Malaysian political observer. "But there is no way to know how it will end."

Bank Negara’s defiance of the attorney general’s refusal to prosecute the case adds to pressures brought by the nine-member Council of Rulers – the country’s sultans – who in an unprecedented formal statement earlier this week warned that investigations into Najib’s affairs and 1MDB must be completed as soon as possible or the country’s image would be harmed. In the same statement, they warned that racial tensions are increasing and that steps must be taken to cool them off.

Despite its importance, the statement was relegated to the back pages of the mainstream press, which is owned by the governing political parties including UMNO. Home Affairs Minister Ahmad Zahid Hamidi issued a statement saying the one by the Sultans was aimed at the opposition for raising racial tensions. The attorney general’s closing down of the Bank Negara investigation was an apparent attempt to comply with the Sultans’ demand that the investigation be completed as soon as possible.

Najib and his allies have been involved in a wide-ranging campaign to stifle dissent over allegations of massive corruption, both personal and through UMNO. The government has used the loosely-worded sedition act or the “Security Offences (Special Measures Act (SOSMA)," passed in 2012 as a substitute to the colonial-era Internal Security Act, and other laws to arrest 138 government opponents.

The latest, and perhaps most startling arrest, was that of Matthias Chang, former Prime Minister Mahathir Mohamad’s personal secretary, when on Oct. 8 Chang visited Khairuddin Hassan, a former Penang UMNO deputy division chief who was jailed last week to stop him from going to the United States to present US law enforcement officials with what he said was evidence involving 1MDB and Najib’s personal finances. Although Mahathir himself, Najib's most implacable critic, has been threatened with arrest, Mahathir has told government officials to go ahead and arrest him.

Both Khairuddin and Chang, who immediately went on a hunger strike, are being charged under the SOSMA statute for “attempts to commit an activity detrimental to parliamentary democracy,” punishable by up to 15 years in prison. Khairuddin had already visited the UK, France and Hong Kong to deliver the same set of documents alleging offenses on Najib’s part.

Others charged over recent weeks with sedition include Tony Pua, the Democratic Action Party’s spear carrier on the 1MD affair. Rafizi Ramli, the secretary general of Parti Keadilan Rakyat, Bersih leader Maria Chin Abdullah and other human rights activists have been charged with various offenses designed to muzzle them. The Malaysiakini cartoonist Zunar has been charged nine times with sedition – primarily for making fun of Najib and his wife, Rosmah Mansor – but has continued to lampoon him.

While there is a sense of increasing pressure on the prime minister – particularly because of the Sultans’ statement, which carries great weight among the 60 percent Malay majority – there is no indication that he is ready to go. Rumors of a deal that would grant him and Rosmah immunity from prosecution have been coming and going for weeks. They remain just that. As Asia Sentinel reported earlier this week, all three of Najib’s brothers and a flock of party elders have both publicly and privately asked him to at least step aside during the investigations. He has replied by firing investigators and charging opponents with sedition.

Use of the sedition laws got a boost this week when the Federal Court, the country’s highest, confirmed the constitutionality of the act in an appeal brought by law lecturer Azmi Sharom challenging the law. Azmi was charged this year for comments he made in 2014 regarding a political crisis in Malaysia’s Selangor state in 2009,

“The decision will have a wider chilling effect on civil society organizations, human rights defenders, academics, and others who continue to face intimidation and harassment,” according to a statement by Amnesty International. “In recent years, Malaysian authorities have made increasing use of the Sedition Act to investigate, charge and imprison opposition politicians, human rights defenders, academics, journalists, lawyers and others who have peacefully expressed opinions that are perceived by the authorities to be critical of the government or monarchy.”

That still leaves the problem of what investigators in Switzerland, the US and other countries will come up with. In the past, Najib has dismissed strong evidence of his family’s US real estate holdings and other 1MDB misdoings published by the New York Times and the Wall Street Journal as untrue. He has been embarrassed by an initial threat to sue the Wall Street Journal that he has now stalled on for several weeks.

In an effort to forestall domestic probes, he has fired his deputy prime minister, the attorney general and the head of the police special branch investigative unit and stalled or terminated investigations by the Malaysian Anti-Crime Commission, the central bank and a special parliamentary committee.

Bank Negara, however, responded with a statement contradicting the attorney general’s office and saying 1MDB had secured permits for investment abroad based on inaccurate or incomplete disclosure of information, breaching banking regulations, and added that it had revoked three permits granted to 1MDB for investments abroad totaling US$1.83 billion (RM7.53 billion) and ordered the state fund to repatriate the funds to Malaysia.