Jho Low, a Malaysian financier, masterminded the 1MDB scandal, siphoning nearly $4.5 billion from a fund created to boost Malaysia’s economy. His connections with banks like BSI facilitated this fraud, leading to severe repercussions, including a tarnished national credit rating and the imprisonment of former Prime Minister Najib Razak. Despite regulatory tightening, concerns remain about the potential for similar financial disasters, as the allure of wealth often overshadows compliance efforts in the industry.
Jho Low: The Mastermind Behind the 1MDB Scandal
Hanspeter Brunner has a faint recollection of meeting the enigmatic Low Taek Jho, commonly known as Jho Low, who is thirty years his junior. This Malaysian figure, of Chinese descent, often blended into the background, presenting himself as unremarkable and intentionally understated. Little did anyone suspect that Low would rise to prominence as the orchestrator of one of Asia’s most significant financial frauds.
During his tenure as the head of the Ticino bank BSI, Brunner encountered Low several times in the bank’s Singapore offices. Low was a consultant for the Malaysian sovereign fund, 1Malaysia Development Berhad (1MDB), which ranked among BSI’s major clients. He partnered with Yak Yew Chee, a BSI client advisor who proved to be a valuable ally due to his reluctance to ask probing questions, all the while reaping substantial financial rewards.
The Collapse of 1MDB: A Cautionary Tale
A decade has passed since the 1MDB fund, initially established in 2009 to stimulate Malaysia’s economy and support its citizens, began to unravel. Modeled after the sovereign wealth funds of Norway and Singapore, as well as the International Petroleum Investment Company, 1MDB was supposed to be a beacon of economic hope. However, it soon became tainted by greed, ambition, and the desire for political dominance, with Jho Low allegedly siphoning off nearly $4.5 billion.
The aftermath of this scandal continues to reverberate: Malaysia faces a tarnished credit rating, depleted state finances, halted infrastructure projects, and the dismantling of the once-dominant Umno party, which had governed since 1957. The then-Prime Minister and Finance Minister Najib Razak, who was also the chairman of 1MDB, ended up incarcerated.
Moreover, financial institutions like BSI and Falcon lost their banking licenses, while major players such as Goldman Sachs, UBS, Deutsche Bank, Rothschild Bank, and J.P. Morgan faced financial repercussions for their negligence. As a result, regulatory bodies around the globe tightened compliance measures to prevent future occurrences of such colossal fraud.
Reflecting on this situation, Brunner questions whether he and the Ticino BSI should have critically examined the dealings of Jho Low, Najib Razak, and their associates, ultimately severing business ties. In his first public comments on the case, Brunner acknowledges that while four out of six individuals at BSI faced penalties, he believes the bank undertook substantial efforts to comprehend the complexities of the 1MDB transactions.
Despite this, Brunner found himself ensnared in the legal system, initially detained in Singapore in February 2016. Throughout the investigation, he was subjected to travel restrictions, though he was never formally charged. In Switzerland, the financial market supervisory authority imposed a four-year professional ban, a decision Brunner is currently appealing.
In his book “The Art of Greed,” Jho Low is depicted as an “Asian Great Gatsby,” embodying the extravagant lifestyle that ultimately led to his downfall. The narrative, partially fictionalized, is based on thorough investigations into how Low deceived banks and influential figures across the globe. His excesses, such as commissioning a $250 million superyacht and dazzling celebrities with extravagant gifts, overshadowed the urgent need to address 1MDB’s staggering debts.
Brunner admits that writing this book served as a therapeutic endeavor during his five-and-a-half years in Singapore, helping him cope with the abrupt end of his career. He suggests that the allure of wealth is a potent force, stating, “Too much money and greed are at play,” and emphasizing that industries ranging from auction houses to law firms are unlikely to enforce stricter regulations voluntarily.
Furthermore, he expresses concerns that similar financial catastrophes, like the 1MDB case, could reoccur. He cites banking secrecy laws as a barrier to information sharing between institutions, allowing cunning clients to present misleading transactions across multiple banks. Although compliance departments were vigilant, warnings were overlooked, as demonstrated by the responses from key figures in various banks.
Ultimately, the overarching temptation of money proved too enticing for many involved in the 1MDB scandal. Compliance objections were routinely dismissed, resulting in a catastrophic failure of oversight that allowed Jho Low to manipulate the financial system to his advantage.