KUALA LUMPUR: Former Bank Negara Malaysia (BNM) governor Tan Sri Zeti Akhtar Aziz kept the people inside the High Court at the edge of their seats when she gave an explosive statement in Datuk Seri Najib Razak's corruption trial involving 1Malaysia Development Berhad (1MDB) today.
The former banker revealed how the BNM was kept in the dark over the transfer of US$700 million from the sovereign wealth fund's account into a private company owned by fugitive businessman Low Taek Jho.
Zeti also said BNM had sent a letter to Najib who was then the finance minister to warn him of the increasing debt levels, the repayment challenges faced by the 1MDB which in fact subsequently led to the restructuring of a loan from the domestic banks.
"In the said letter, BNM had also urged Najib to increase the transparency around 1MDB's debt and operations, and to contain any further increase in its debt levels.
"On Jan 16, 2015, BNM had written again to Najib regarding its concern on 1MDB and to document the significant potential implications it would have on the government's fiscal position.
"BNM highlighted that in such an event, it could result in the immediate crystallisation of an equivalent of RM16.6 billion in contingent obligations of the government arising from the explicit guarantees that had been provided for the 1MDB's debt.
"These are Government Guarantee debt which are obligations of the government that must be met. In addition, there could be a possible consequent downgrading of Malaysia's sovereign rating," she said.
She said BNM had no knowledge that funds that were meant for investment by 1MDB had been remitted into accounts that were unrelated to 1MDB's investment declaration.
"BNM received disclosure on a confidential basis on March 13, 2015, involving a foreign entity that had transferred a major sum of funds to an entity in their jurisdiction that was beneficially owned by Low.
"I on behalf of BNM had on March 19, 2015, met the then Inspector General of Police Tan Sri Khalid Abu Bakar to disclose this information to him.
"BNM, being a member of Egmont Group of Financial Intelligence Units (FIU), is bound by the Egmont Group Principles for Information Exchange to protect the confidentiality of information in accordance with international standards and protocols," she said.
Zeti said on March 20, 2015, BNM had commenced its on-site examinations on AmBank and Deutsche Bank Malaysia Berhad (DBMB) to verify the allegation that 1MDB had transferred US$700 million out of the USD1 billion of funds to a private-owned company.
She said the monies (US$700 million) was designated for the acquisition of 40 per cent of the shares in 1MDB Petrosaudi Limited, British Virgin Island (JV Co.), as well as other 1MDB funds to the account of Good Star Limited (GSL) instead of the account of the JV Co.
"Following the approval for the remittances of funds for the said investment, a sum of US$700 million from the said funds was instead remitted by 1MDB to the account of Good Star Limited (GSL) through Deutsche Bank.
"It was only during the on-site examination, that it was validated that the funds had been remitted to Good Star Limited, the beneficial owner of which was Low," she said.
Zeti said on April 21, 2015, she had met with the then Malaysian Anti-Corruption Commission (MACC) chief commissioner Tan Sri Abu Kassim Mohamed to disclose the finding.
She said this included the information that validated that Low was the beneficial owner of the GSL account which received the US$700 million from 1MDB on Sept 30, 2009.
On June 9, 2015, the then Attorney General (AG) Tan Sri Abdul Gani Patail called for the first task force meeting, involving Abu Kassim and herself to discuss MACC and BNM's investigations on 1MDB.
However, on July 27, the same year, the task force was terminated when Abdul Gani's services as the AG ended.
"There were no longer any task force meetings that were convened by the new AG, Tan Sri Apandi Ali.
"On Aug 13, BNM submitted an Investigation Paper (IP) to the Attorney General's Chambers (AGC) with the recommendation to initiate criminal prosecution and to charge 1MDB including the senior officers of 1MDB.
"The entity and its officers were found to have contravened the provision under the Exchange Control Act 1953 (ECA) for furnishing false information to BNM in the 1MDB application for permission to make payments outside Malaysia.
"Despite all the damning evidence gathered and recorded by BNM, the then AGC, for reasons unknown, had on Sept 11 decided that the investigation paper submitted by BNM was to be classified as 'No Further Action'," she said.
Najib, 70, is facing four charges of using his position to obtain bribes totalling RM2.3 billion from 1MDB funds and 21 charges of money laundering involving the same amount.