Hong Kong slaps a record fine of US$350 million on Goldman Sachs’ Asia unit for its role in underwriting 1MDB’s bond sales

The fine is the biggest amount imposed by the SFC, which blasted “serious lapses and deficiencies … that contributed to misappropriation of funds at 1MDB”

Goldman Sachs (Asia) in Hong Kong ultimately received almost US$210 million in fees, the largest share out of Goldman Sachs units

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The Wall Street bank received US$581.5 million in fees from 1MDB, inclusive of US$567 million in commission from the three bond sales. Its Hong Kong unit alone collected US$210 million, or 37 per cent of the total fees from the debt sales. Photo: Reuters

Published: 5:27pm, 22 Oct 2020Updated: 3:12am, 23 Oct 2020

Goldman Sachs (Asia), the regional unit of the US investment bank, has been slapped with the highest fine ever imposed by Hong Kong’s Securities and Futures Commission (SFC) for its role in a financial scandal that stretched to Hollywood from Southeast Asia, and toppled a government in Malaysia.

The Hong Kong-based unit of the Wall Street bank was fined US$350 million due to the “serious lapses and deficiencies in its management supervisory, risk, compliance and anti-money-laundering controls that contributed to the misappropriation of US$2.6 billion” from three bond offerings in 2012 and 2013 that raised US$6.5 billion for 1Malaysia Development Berhad (1MDB), the SFC said in a statement.

Goldman Sachs (Asia) in Hong Kong had significant involvement in the origination, approval, execution and sales process of the three 1MDB bond offerings, the SFC said. The Wall Street bank received US$581.5 million in fees from 1MDB, inclusive of US$567 million in commission from the three bond sales.

Its Hong Kong unit alone collected US$210 million, or 37 per cent of the total fees from the debt sales, the largest chunk among various Goldman Sachs entities.

The US bank lacked adequate controls in place to monitor staff and detect misconduct in its day-to-day operations, and allowed the 1MDB bond offerings to proceed when numerous red flags surrounding the offerings had not been properly scrutinised and satisfactory answers to such red flags had not been obtained.