“This is the first time that a Luxembourg banking establishment has been convicted in a money laundering case,” the Grand Duchy’s judicial authorities noted following the punishment involving the misappropriation of money from 1MDB.
The fund, created in 2009 as then prime minister Najib Razak sought to modernise Malaysia, soon found itself embroiled in corruption allegations, leading to a swathe of investigations notably in Switzerland, Singapore and the US.
“A very large portion of the funds raised by 1MDB was siphoned off … particularly between 2009 and 2013, by the prime minister, Malaysian officials, and others,” the court stated.
In Luxembourg, which hosts the European subsidiary of Switzerland’s Edmond de Rothschild bank, dozens of accounts opened at the establishment by an Emirati national in the name of a slew of different companies were used to divert money away from the fund.
An investigation that was opened in the Grand Duchy in 2016 “established that through complex international financial flows, funds from 1MDB were ultimately credited to the bank accounts of several of these entities”.
Before arriving in the accounts, the cash moved through a number of different financial jurisdictions, including Caribbean tax havens, the court said.
The bank stressed in a statement that the events had taken place “15 years ago” and had led to the “implementation of a comprehensive remediation plan … (which was) completed in 2019.”
“The employees involved are no longer part of the organisation,” the statement read.
Najib, 71, who served as prime minister from 2009 to 2018, was found guilty two years later of abuse of power and misappropriation of funds. The 1MDB scandal essentially cost him the 2018 general election as well.
He was initially sentenced to 12 years in prison in 2020 but the sentence was halved by a pardons board in February last year.
The former prime minister is currently seeking to have his jail term converted to house arrest.
Thursday’s judgment closes the case regarding criminal liability of the bank.
Two other investigations are ongoing, one concerning the Emirati client and his companies, and the other targeting executives and employees of Edmond de Rothschild Europe.