Why 1MDB still troubles AmBank
30 Sep 2019

Malaysia’s AmBank makes no secret of its strengths.

“We are very good in two types of markets; the high end, which is the people who are very rich, and the mass”, an executive tells Asiamoney as she outlines the bank’s mission to cut overheads by migrating its older, less tech-savvy clientele to a new app. “We have a whole lot of people who are rich in the older demographic.”

But it’s an unwitting description of a deeper, embarrassing truth that has dogged AmBank in recent years.

As Malaysians have come to know all too well, AmBank’s best-known legacy customer happens to be an extremely rich, elderly man who is notorious for the hundreds of millions that sloshed through his AmBank accounts; these sums amounted to many multiples of his official RM22,827 ($5,470) monthly salary during the nine years from 2009 to 2018 when he was Malaysia’s most powerful man.

That customer is Malaysia’s former prime minister Najib Razak, whose accounts were held at AmBank’s branch in downtown Kuala Lumpur on Jalan Raja Chulan. Malaysians know that because Najib is on trial in Kuala Lumpur for alleged industrial-scale corruption in relation to the $1.6 billion plunder of 1MDB, the state-owned investment company that he chaired as prime minister.

This year, AmBank has endured a torrent of embarrassing revelations aired in testimony before Malaysia’s High Court about how it handled Najib and his Malaysian associate Low Taek Jho, aka Jho Low, the alleged mastermind of the 1MDB fraud who is believed to have fled to China.

Najib and two other members of his family, notably his handbag-loving wife Rosmah, now face 70 criminal charges between them, charges they deny. Najib alone has 38 accusations levelled against him, and is accused by government prosecutors of criminal breach of trust relating to almost $1.6 billion of state funds. He has pleaded not guilty to all charges.

As for those who constitute Malaysia’s mass market, cited by the AmBank executive, many became so incensed by AmBank’s rich old customer Najib, a man they dubbed ‘Lord of the Ringgits,’ that they overthrew him in elections last year after details of the 1MDB looting became known.

Najib’s United Malays National Organization (Umno) lost power for the first time in independent Malaysia’s 61-year history, returning the country’s 92-year-old political warhorse Mahathir Mohamad to a second stint as PM.

Since 2015, Malaysia’s sixth-biggest bank has struggled to overcome the ignominy of facilitating what the US Justice Department described as “kleptocracy at its worst” through 2014 and 2015.

Indeed, for AmBank, 2015 turned out to a particularly bad year. At the very end of 2014 its then chief executive, Australian Ashok Ramamurthy, suddenly resigned and hurriedly left Malaysia. In July, AmBank was raided by investigators from Malaysia’s central Bank Negara, who seized phones, data drives and internal emails.

Through July to September that year, AmBank’s share price went into freefall, slumping 28%, despite having reported 8% higher profits in the full year to the end of March 2015.

In November, AmBank revealed it had been fined RM53.7 million by Bank Negara for “non-compliance with certain regulations.” Soon after, it had a new boss, Sulaiman bin Mohamed Tahir, a long-time staffer at rival bank CIMB who joined AmBank after serving just four months as CIMB’s chief executive.

Four years on, details of that difficult year are only starting to emerge. AmBank continues to improve profits, but that performance is not reflected in its share price, which at RM4.16 remains defiantly below the RM4.30 depth it plumbed in 2015.

The bank has only partially admitted that it had “compliance issues” in 2015, without publicly explaining why and what they were.

Indeed, AmBank seems to be in denial about its pivotal role in the 1MDB scam; its reluctance to publicly confront its role in the corruption scandal is at odds with the new openness that has swept Malaysia since the 2018 elections.

Now almost four years into the job, AmBank’s Tahir still seems reluctant to address how the firm is getting over its 1MDB nightmare, as the market is constantly reminded of critical failings in its internal systems and compliance.

Through July to September, as fresh revelations about AmBank’s links with Najib and Jho Low were aired in court, Asiamoney made repeated requests to meet Tahir so he could outline the measures taken to restore normalcy at AmBank, but the bank did not set up a meeting.

State investigators continue to pore over the 1MDB matter: in August, the Malaysian government’s attorney-general Tommy Thomas announced he would be seeking custodial sentences and criminal fines for 17 former and current executives of the US investment bank Goldman Sachs for its role in 1MDB’s financing.

Unconvinced 

The raid on AmBank’s branch on Jalan Raja Chulan in Kuala Lumpur by investigators from Bank Negara on July 6, 2015, was part of an investigation under Malaysia’s anti-money laundering, anti-terrorism financing and proceeds of unlawful activities act. The raid was not announced at the time; Malaysians only knew it had taken place via unofficial social media chatter and later, in media reports and court hearings after Najib had lost power.

By Eric Ellis, Euromoney, 27 September 2019

Read more at Euromoney

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