The SFC said in a statement that serious lapses and deficiencies resulted in the misappropriation of United States dollars 2.6 billion from the 1Malaysia Development Berhad fund.
Yet, just as Goldman Sachs should have prevented at least part of the theft of billions from the fund, there are those who reckon that the foreign regulators too should have picked up on the red flags - in particular the outsized US$600 million fees or 9.2% of the US$6.5 billion debt papers Goldman Sachs arranged for 1MDB that the bank has now agreed to disgorge, along with the payment of US$2.3 billion in fines to the various regulators. Former managing director and head of investment banking for GS Malaysia Roger Ng was charged with conspiring to launder money.
In July, Goldman agreed to pay $3.9 billion to settle Malaysia's criminal probe and this week it is expected to agree to pay more than $2 billion to settle USA charges over its role in the scandal. In July, it agreed to a separate settlement of $3.9 billion with the Malaysian government.
"Goldman Sachs accepted responsibility for its role in a conspiracy to bribe high-ranking foreign officials to obtain lucrative underwriting and other business relating to 1MDB", said Acting Assistant Attorney General, Brian C. Rabbitt of the Justice Department's Criminal Division. Goldman Sachs became the underwriter or bonds that 1MDB would issue to fund "investment projects for the economic benefit of Malaysia and its people".
The guilty plea could curtail activities of Goldman Sachs Malaysia but allows the parent company to avoid admitting wrongdoing in court - which would have damaged its ability to do business.
In particular, Goldman Sachs Asia, the compliance and control hub of Goldman Sachs in the region and based in Hong Kong, had significant involvement in the origination, approval, execution and sales process of the three 1MDB bond offerings.
Goldman says it will withhold or get back some US$174 million in compensation awarded to its executives.
"This enforcement action is the result of a rigorous, independent investigation conducted by the SFC", said Ashley Alder, the SFC's chief executive. Part of the money also goes to the US Securities and Exchange Commission (US$400 million), the US Federal Reserve (US$154 million) and New York's Department of Financial Services (US$150 million).
Goldman Sachs has also faced regulatory penalties from other governments over the 1MDB scandal.
In Singapore, the MAS notes that Swampillai and his then subordinate, Yeo Jiawei, had assisted 1MDB to restructure several of its joint venture interests, and in the course of doing so, they channelled a portion of the fund management fees to an entity beneficially owned by Swampillai, without BSIS' knowledge and authorization.