SEC Charges Goldman Sachs with FCPA Violations

Daniel Fowler
October 27, 2020

The DOJ characterized the US investment bank's involvement thusly: "Over a period of five years, Goldman Sachs participated in a sweeping global corruption scheme, conspiring to avail itself of more than $1.6 billion in bribes to multiple high-level government officials across several countries so that the company could reap hundreds of millions of dollars in fees, all to the detriment of the people of Malaysia and the reputation of American financial institutions operating overseas".

The Malaysian government dropped the charges against Goldman in July after reaching a $3.9 billion settlement with the financial giant.

This is not the first time Goldman is paying for its participation in the scandal. According to the watchdog, serious lapses and deficiencies on part of the Hong Kong-based compliance and control hub of the Wall Street bank contributed to the misappropriation of Dollars 2.6 billion.

The regulator notes that the securities industry is of fundamental importance to Hong Kong's role as an worldwide financial centre. Its board of directors also admits that the scandal is "an institutional failure, inconsistent with the high expectations it has for the firm".

Hong Kong's markets watchdog on Thursday fined Goldman Sachs's Asian business $350 million for its role in Malaysia's multibillion-dollar 1MDB scandal, the largest single fine ever levied by the regulator in the Asian financial hub. The clawbacks and forfeitures for Goldman execs, current and former, are expected to total $174 million.

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"This enforcement action is the result of a rigorous, independent investigation conducted by the SFC", said Ashley Alder, the SFC's chief executive. "The penalty in this case - assessed exclusively 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".

A Goldman Sachs spokesman said the Wall Street bank would issue a statement in due course.

The SEC settlement agreement summarizes the bank's wrongdoing as "a scheme perpetrated by now former senior employees of Goldman Sachs who authorized and paid bribes and kickbacks to government officials in Malaysia and the Emirate of Abu Dhabi ("Abu Dhabi") in order to secure lucrative business for the Company and benefits for themselves". The fund was mostly funded by bond sales that Goldman Sachs investment bankers arranged. This is a chunk of change, but it's not going to bankrupt Goldman Sachs.

Other examples show how Goldman's compliance department flagged concerns about working with financier Jho Low, a consultant for 1MDB accused by prosecutors of leading the alleged heist.

In Singapore, the MAS notes that Swampillai and his then subordinate, Yeo Jiawei, had assisted 1MDB to restructure several of its joint venture interests, and in the course of doing so, they channelled a portion of the fund management fees to an entity beneficially owned by Swampillai, without BSIS' knowledge and authorization.

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