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Editor’s Note: In the 16^th installment of our series, the ACAMS moneylaundering.com legal team looks at U.S. efforts to recover assets associated with the 1Malaysia Development Berhad scandal.

In July 2020, the U.S. Justice Department filed six civil forfeiture complaints seeking the recovery of approximately $96 million in assets linked to the 1Malaysia Development Berhad, or 1MDB scandal. The complaints brought the total the U.S. has sought to recover to more than $1.8 billion in assets traceable to funds embezzled from 1MDB, or less than half the estimated $4.5 billion misappropriated by high-level officials and their associates between 2009 and 2014.

Despite reaching a settlement in two civil forfeiture cases to recover over $49 million in May 2020, the new civil forfeiture complaints illustrate that efforts to recover the ill-gotten assets aren’t nearing completion four years after the Justice Department launched the Kleptocracy Asset Recovery Initiative.

Asset recovery actions targeting money misappropriated from 1MDB began in July 2016 with the filing of 12 civil complaints  seeking the forfeiture of over $1 billion in assets. These initial complaints sought to recover businesses, artwork, high-end real estate and other assets purchased with the embezzled funds.

Nearly a year later, the department filed additional civil forfeiture complaints seeking the recovery of about $540 million more in assets associated with an international conspiracy to launder funds misappropriated from 1MDB. However, in August 2017, the Justice Department filed 10 motions to stay civil forfeiture proceedings under the pretext that the civil cases would likely have adverse effects on the ability of authorities to conduct a related criminal investigation.

The next civil complaints pertaining to the recovery of embezzled 1MDB assets didn’t come until Nov. 30, 2018, when the department filed a civil forfeiture action seeking to recover nearly $74 million in assets linked to Jho Taek Low, who was indicted earlier in the month alongside Ng Chong Hwa for their central roles in the scandal.

In fact, the only progress on U.S. recovery actions before the criminal charges were announced was a March 2018 settlement where film producer Red Granite Pictures agreed to forfeit $60 million connected to “The Wolf of Wall Street” and two other films financed in part with 1MDB funds. This interim period also saw the Attorney General of Malaysia announce the return of a yacht that was seized by Indonesian authorities in early 2018 at the request of the Justice Department.

On the same day that criminal charges against the former 1MDB officials were announced, former Goldman Sachs banker Tim Leissner pleaded guilty to conspiracy to launder money and to violating the Foreign Corrupt Practices Act for his role in misappropriating over $2.7 billion in 1MDB funds. In addition to a wave of regulatory actions from both U.S. agencies and authorities overseas, Malaysia’s Attorney General announced criminal charges against Leissner and subsidiaries of Goldman Sachs.

Progress in these criminal and regulatory investigations resulted in further Justice Department civil forfeiture complaint filings on Feb. 22, 2019, seeking the recovery of approximately $38 million in assets connected to the 1MDB scandal.

More significantly, on Oct. 30, 2019, the Justice Department announced the release of over $700 million representing assets obtained by Jho Taek Low and his family using money misappropriated from 1MDB. Under the terms of this settlement, Low, his family members, and an entity serving as the trustee overseeing the assets at issue agreed to cooperate with the department to ensure the orderly transfer, management and disposition of the assets. These assets included luxury real estate in the U.S. and U.K., and tens of millions of dollars in business investments.

In April 2020, the Justice Department announced that it had repatriated approximately $300 million more to Malaysia that was misappropriated from 1MDB and laundered through financial institutions in several countries, including the U.S., Switzerland, Singapore and Luxembourg. A little over three weeks later, U.S. authorities reached a settlement in two civil forfeiture cases linked to 1MDB funds, resulting in the recovery of assets worth more than $49 million.

These actions in late 2019 and the first half of 2020 brought the total value of assets that the Justice Department has recovered to nearly $1.1 billion, making this case the largest series of actions brought under the Kleptocracy Asset Recovery Initiative, as well as the largest civil forfeiture action in the department’s history. Despite the slow progress, Prime Minister Mahathir Mohamad of Malaysia has expressed hope that a large portion of the estimated $4.5 billion stolen from 1MDB will be returned to the country.

Contact Silas Bartels at SBartels@acams.org