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Malaysia in transition

Malaysia fines Deloitte for 1MDB negligence

Accountancy slapped with $537,000 penalty for failing to report irregularities

Malaysia fines Deloitte for negligence in its audit of 1MDB ahead of the issuance of a bond by the state fund's units.    © Reuters

KUALA LUMPUR -- The Malaysian capital markets regulator on Wednesday fined Deloitte 2.2 million ringgit ($537,000) for four breaches related to a bond issued by wholly owned units of scandal-tainted state fund 1Malaysia Development Berhad.

Deloitte, one of the big four international accounting companies, acted as auditor for the units, Bandar Malaysia and 1MDB Real Estate, for fiscal 2015 and 2016. 1MDB Real Estate provided collateral for the 2.4 billion Islamic bond issued in 2014.

Deloitte failed to report irregularities that may have had a material impact on the issuer's ability to repay bondholders, the Securities Commission said. These breaches, the regulator said, were "serious" in nature, more so than the auditor's admission in its report of the "existence of material uncertainty" in the units as a result of ongoing probes in the sovereign fund.

1MDB was under investigation by authorities then after its funds were allegedly siphoned into the bank account of former Prime Minister Najib Razak. Malaysian authorities arrested and charged Najib last year over numerous criminal activities including money laundering.

The Malaysian government, under Prime Minister Mahathir Mohamad elected in May 2018, accelerated the investigation into the 1MDB scandal. It has also charged alleged mastermind financier Low Taek Jho, who is still at large.

Mahathir has also accused U.S. investment bank Goldman Sachs for its role in the bond issuance, which led to an apology from CEO David Solomon.

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