The Strategist

Goldman Sachs ready to pay about $ 2 billion in fines for 1MBD scandal

12/20/2019 - 09:20

The financial holding company is ready to pay about $ 2 billion in fines to resolve the proceedings.

Gregory Varnum
Gregory Varnum
Goldman Sachs is in active negotiations with the U.S. Department of Justice to pay fines of about $ 2 billion for participating in a scandal over the 1MBD Malaysian fund, CNBC reports citing sources. Although negotiations have not yet been completed, an agreement may be reached next month, the channel’s interlocutors said. The Asian subsidiary of the investment bank may plead guilty to violating U.S. anti-corruption laws, and Goldman will have to set up an independent unit to oversee compliance.

Earlier, the 1Malaysia Development Berhad, or 1MDB, has found itself at the center of one of the biggest financial scandals in history, as it has been the subject of investigations into corruption and money laundering in at least six countries.

Goldman earned about $ 600 million for raising $ 6.5 billion for the fund.

In December, Malaysia brought a criminal charge against Goldman Sachs, saying that $ 2.7 billion of proceeds from 1MDB bonds were misappropriated and that it required a “significant increase” in fines.

Malaysia also indicted two former Goldman partners for their role in the scandal. The Malaysian authorities said they were ready to resolve the scandal, but this would cost the investment bank $ 7.5 billion, taking into account all reparations and compensations.

Thanks to the deal with U.S. Department of Justice, Goldman can avoid the worst possible consequences of an international scandal. Analysts, including Mike Mayo of Wells Fargo, have estimated that the cost of resolving the 1MBD situation could be as high as $ 5 billion. The fact that the Asian subsidiary of Goldman, and not the parent company, is likely to plead guilty, is likely to help distance the main business from scandal.

At the same time, negotiations between Goldman and the Malaysian authorities continue, CNBC notes.