HK regulator fines Goldman for 1MDB

Hong Kong’s Securities and Futures Commission said Thursday it has fined the Asian arm of US investment banking giant Goldman Sachs a record US$350 million for its role in the 1Malaysia Development Berhad (1MDB) corruption scandal.

The securities regulator found that Goldman Sachs (Asia) LLC failed in its management supervisory, risk, compliance and anti-money laundering controls that contributed to the misappropriation of US$2.6 billion from $6.5 billion that 1MDB raised in three bond offerings in 2012 and 2013.

Goldman Sachs Asia, the compliance and control hub of Goldman Sachs in Asia and based in Hong Kong, pocketed 37% of the total revenue of US$567 million generated from the bond offerings, the regulator said.

“The penalty in this case — assessed solely in accordance with Hong Kong’s own fining framework — reflects our findings that Goldman Sachs Asia failed to deal properly with numerous suspicious circumstances surrounding the 1MDB bond offerings,” the commission’s CEO Ashley Alder said in a statement.

“These failures led to multiple, serious breaches of the rules which set out the high standards of behaviour expected of all firms supervised by the SFC,” he said.

The bank was found to have failed to supervise ex-Goldman partner Tim Leissner, who was involved in the execution of the bond offerings, to identify and address money laundering and bribery concerns, to exercise due diligence when vetting and approving the offerings and to shield clients from acts of fraud, dishonesty or professional misconduct.

In 2018, Leissner pleaded guilty to US Justice Department charges for conspiring with Malaysian financier Jho Low to bribe Malaysian and Abu Dhabi officials to retain businesses from 1MDB for Goldman Sachs, the regulator said, adding that Leissner was banned from re-entering the industry for life in 2019.

“Goldman Sachs Asia fell far short of the standards expected of a licensed intermediary in the 1MDB case and suffered not only reputational damage from its own failures, but also brought the securities industry into disrepute,” the commission’s executive director of enforcement Thomas Atkinson said.

The reprimand came following a Malaysian court’s acquittal of Goldman Sachs last month after it agreed to pay $2.5 billion in a deal struck with the Malaysian government over the bond sales.

In 2019, the commission slapped a record fine totaling HK$786.7 million (US$100 million) against four investment and commercial banks, including UBS AG and its securities arm for HK$375 million.