China may set its cautious eyes on Goldman Sachs as the bank face charges related to money laundering of funds it helped to raise for state-owned 1MDB, especially that the financial service provider was able to dupe Malaysian government.
Worst, the 149-year-old bank could face global sanctions, market and law experts told The New York Post. While Malaysia may not send anyone involved in prison, the country may ask Goldman Sachs to pay hefty fees, the experts said.
Compared to Malaysia, China is the second-largest economy in the world and will not risk having the same scandal happening in its own backyard, particularly not during this time while China-US trade war is not fully settled.
One former US securities told The Post Chinese regulators will now be wary about engaging Goldman Sachs with the bank instigating a crime as big as the 1MDB scandal.
The scandal was particularly controversial because Goldman Sachs has held themselves out as the "preeminent global adviser/arranger for bonds." The highest standards are only expected from the financial institution.
Goldman Sachs may spend $5 billion just to clean up the mess resulting from the 1MBD scandal, according to Mike Mayo as reported by CNBC. The bank may also endure 18 months of overhang.
In its defense, Goldman said it was deceived by Malaysian officials who managed the bonds for the state-owned fund. The bank said members of the former Malaysian government and officials handling the 1MBD fund misled them about how the proceeds from the transactions are being utilized.
The bank said 1MDB's CEO and board were the ones who reported to the Prime Minister during the transaction. The officials gave assurance to Goldman that no intermediaries were involved.
It would be recalled that former Malaysian Prime Minister Najib Razak was ousted after being linked to a similar scandal also tied to 1MDB.
The bank may be referring to Jho Law, a Malaysian financier described by The New York Times as someone "flamboyant." U.S. investigators alleged Jho Law masterminded the IMDB scandal.
Goldman said the Malaysian government did not ask for Goldman's explanation before it files the case against the bank. And since only its formers bankers were linked to the case, the issue should not affect Goldman Sachs' businesses anywhere in the world, Goldman argued.
Goldman Sachs former employees who were charged in connection with the case were Malaysian Roger Ng and Timothy Leissner. Ng, who was charged four counts of urging the bank to issue misleading statements to attract more prospective buyers for the bonds, now faces extradition. Leissner, who had pleaded guilty to conspiracy, suffered a lifetime ban in Singapore.
