The delay of the United Kingdom’s review of its relationship with its overseas territories after a snap UK general election was called for July 4 confirms the wisdom of a Chinese greeting: “May you live in interesting times.” In other words, don’t take anything for granted.
We cannot predict how the new UK government will handle the stalled OT review. However, we should be reassured by Premier Dr. Natalio “Sowande” Wheatley’s assertion of his good relationship with Governor Daniel Pruce and his confirmation that the Virgin Islands government will be focussing on completing the 19 outstanding Commission of Inquiry recommendations by the new final deadline on Aug. 31.
I was nevertheless disturbed to read that the premier had encouraged fellow attendees at an international conference to claim funding from United Nations agencies, while the deputy premier was being feted in a major Chinese city as she sought greater business for our financial services industry.
1MDB scandal
In a May 31, 2018, commentary titled “The VI company that influenced an election,” I aired concerns about the exposure before Malaysia’s 2018 general election of a massive money-laundering scheme involving 1Malaysia Development Berhad (aka 1MDB), a state fund set up to develop Malaysia’s financial services industry. A VI-registered company allegedly played a leading role in the scheme.
In that 2018 election, the Malaysia opposition won a resounding victory over the governing coalition after its more than 60 years in power. Then the police arrested Najib Razak, formerly Malaysia’s prime minister, and seized sacks of cash, jewellery, watches and designer handbags worth an estimated $268 million from 10 properties allegedly linked to him and his wife Rosmah Mansor.
The United States Department of Justice alleged that public officials conspired with others to steal public funds worth $4.5 billion, in part by using the purchase of luxury real estate in several countries including the US. Meanwhile, Malaysian businessman Low Taek Jho (also known as Jho Low) allegedly created a sophisticated maze of offshore shell companies to conceal the money’s true beneficiaries.
In February 2018, the US DOJ seized a megayacht off Bali, naming owner “Eric Tan” (an alleged pseudonym for Mr. Low) as a mastermind behind the whole money-laundering exercise and accusing him of operating behind a number of offshore companies in which he was the sole shareholder.
What happened since?
Mr. Najib’s trial began in 2019, and after 235 days of court proceedings the prosecution finally rested its case. In July 2020, the country’s high court found Mr. Najib guilty on all seven charges of abuse of power, criminal breach of trust and money laundering. The case centred largely around his transfer of about $9.4 million from a former unit of 1MDB into his private accounts. He was sentenced to 12 years in prison and a fine of about $46.8 million.
In August 2022, the Malaysian supreme court rejected Mr. Najib’s appeal and he went to prison. Rarely has a senior Malaysian politician been imprisoned, so it was seen as an opportunity to reduce the inequality and graft that had long pervaded Malaysia and driven many people to seek opportunities abroad.
A week after Mr. Najib went to prison, the Kuala Lumpur High Court found his wife guilty of three corruption charges and sentenced her to 10 years in prison and fined her approximately $216 million. She had originally been charged with some 20 counts of corruption, money laundering and tax evasion. Revelations about her vast collections of luxury goods angered ordinary citizens.
Alleged ‘puppet master’
On May 27, 2024, the 49th prosecution witness, under cross-examination by Mr. Najib’s lawyer, acknowledged that Mr. Low was active in strategising the operations of 1MDB, and he was described in the high court as the “puppet master” behind the fund’s operations despite not holding any official position in it.
Malaysia’s anti-corruption body believed he had fled to Macau, a former Portuguese colony in China economically dependent on casinos, but he is rumoured to have been seen in Hong Kong and even on the Chinese mainland.
In February 2024, as liquidators of companies linked to the 1MDB scandal sought the fund’s assets, they reportedly filed in the Southern District of Florida for Chapter 15 under the US bankruptcy code.
Who has gained, lost?
The Malaysian people were the greatest losers and Mr. Low for now may be the greatest winner, but on this side of the Atlantic the biggest gainers must be the American lawyers involved in the cases and the greatest losers are the US taxpayers.
In the VI, the government benefits from the financial services industry, which brings fees and employment, and leaders have amended the BVI Business Companies Act and other laws as part of efforts to stay up to date with international standards. But the territory nevertheless continues to be called a dirty tax haven internationally amid pressure to reveal the true beneficial owners of companies registered here.
Meanwhile, tourists are being subjected to the VI’s poorly maintained infrastructure, and residents are suffering from underfunded social services and badly maintained roads and public utilities.
