Goldman Sachs Singapore will pay US$122 million (S$165.7 million) to the Singapore government for its role in the 1Malaysia Development Bhd (1MDB) bond offerings.

This is according to a joint statement by the Attorney-General’s Chambers (AGC), Commercial Affairs Department (CAD), and Monetary Authority of Singapore (MAS).

Deferred prosecution agreement

The Goldman Sachs Group has entered into a deferred prosecution agreement with the Department of Justice of the United States of America.

The deferred prosecution agreement provides for a global resolution of Goldman Sachs Group's role in bond offerings related to 1Malaysia Development Berhad (1MDB).

The deferred prosecution agreement is led by the U.S. Department of Justice and discussed with Singapore.

As part of the deferred prosecution agreement, Goldman Sachs Group and its affiliates will pay approximately US$2.3 billion to the U.S. authorities.

Goldman Sachs Singapore will pay US$122 million (S$165.7 million) to the Singapore government for its role in the 1MDB bond offerings.

36-month conditional warning in lieu of prosecution

CAD has served Goldman Sachs Singapore a 36-month conditional warning in lieu of prosecution for three counts of corruption offences punishable under the Prevention of Corruption Act.

MAS has issued Goldman Sachs Singapore a direction under the Securities and Futures Act to appoint an independent external party to conduct a review of its remedial measures.

Tim Leissner and Roger Ng

CAD investigated Goldman Sachs Group and two of its former managing directors, Tim Leissner (top left) and Ng Chong Hwa, also known as Roger Ng (top right), in relation to the three bond offerings underwritten by Goldman Sachs International for the subsidiaries of 1MDB.

Leissner was based in Hong Kong Special Administrative Region at the relevant time as a responsible officer of Goldman Sachs (Asia).

Goldman Sachs (Asia) was significantly involved in the conduct of the three 1MDB bond offerings, while Leissner was instrumental in procuring the bond deals from 1MDB.

In August 2018, Leissner pleaded guilty in the United States District Court to one count for conspiracy to violate the Foreign Corrupt Practices Act and one count for conspiracy to commit money laundering.

Jho Low informed about kickbacks

Leissner disclosed that Low Taek Jho (pictured centre) had informed him and Ng that some of the proceeds from the 1MDB bonds would be paid as kickbacks and bribes to certain Malaysian and Abu Dhabi officials.

Leissner admitted to retaining some of these diverted funds for his personal use.

Following Leissner’s guilty plea, MAS had on Dec. 19, 2018 increased the 10-year prohibition order initially issued against Leissner to a lifetime order.

A 10-year prohibition order had initially been issued against Leissner on March 13, 2017 after he was found to have sent an unauthorised reference letter on behalf of Goldman Sachs (Asia) without the firm’s knowledge to a Luxembourg-based financial institution, and to have made false statements in the letter.

In consultation with the Attorney-General’s Chambers, CAD issued the conditional warning in lieu of prosecution to Goldman Sachs Group for the offences under the Prevent of Corruption Act.

Pursuant to the conditional warning, Goldman Sachs Singapore has to commit to, among other things, paying US$122 million (S$165.7) to the Singapore government’s consolidated fund within five working days from the date of the conditional warning.

Goldman Sachs Singapore also has to commit to continuing to cooperate with CAD in its 1MDB-related investigations and complying with the terms of the deferred prosecution agreement.

It will also disgorge a sum of US$61 million (S$82.8 million) to the Malaysian authorities, which will be paid and/ or credited in accordance with the deferred prosecution act.

This sum represents Goldman Sachs Singapore’s share of fees earned from the 1MDB bond offerings.

The total amount paid or to be paid by Goldman Sachs Singapore under the conditional warning is US$183 million (S$248.5) in total.

2016 inspection: Independent external party review measures

MAS has also directed Goldman Sachs Singapore to appoint an independent external party.

Goldman Sachs Singapore has to review the measures taken by it to remediate deficiencies uncovered during an inspection conducted by MAS in 2016 on the institution's risk governance and controls in relation to the 1MDB bond offerings.

MAS found lapses in Goldman Sachs Singapore's management oversight of enterprise-wide risk, inadequate documentation of risk assessments performed for the 1MDB bond offerings, and poor corrective actions taken for staff’s non-compliance with its policies and processes.

MAS observed during its 2016 inspection that the control deficiencies uncovered extended beyond Goldman Sachs Singapore and involved aspects of Goldman Sachs Group's firm-wide controls and processes.

These included significant gaps in the management oversight exercised by Goldman Sachs Group's global committees in approving the 1MDB bond offerings.

MAS has shared its observations with the U.S. Securities and Exchange Commission and the Federal Reserve Board, which are the parent regulators of Goldman Sachs Group.

Address identified control deficiencies

Following the completion of the inspection in end 2017, MAS required Goldman Sachs Singapore to undertake various remedial measures to address the identified control deficiencies.

Goldman Sachs Singapore’s internal audit of these remedial measures was completed in June 2020.

Review sustainability of remedial measures

In view of the seriousness of the control deficiencies identified in MAS’ inspection and the corruption offences, MAS has directed Goldman Sachs Singapore to appoint an external party to conduct an independent and rigorous verification of the effectiveness and sustainability of the remedial measures.

MAS will also closely monitor the implementation of any additional measures to be taken by Goldman Sachs Singapore as part of the deferred prosecution agreement.

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Top composite photo via Getty