One of the Asian subsidiaries of Goldman Sachs has agreed to plead guilty to US charges in the 1MDB money laundering and bribery scandal as part of a global regulatory settlement that includes more than $2bn in new penalties.
The settlement between Goldman and authorities including the US Department of Justice will probably be announced on Thursday, three people familiar with the situation said. One of them said it would include a guilty plea in the US by one of Goldman’s Asian units.
Such a plea could restrict the Asian subsidiary’s ability to perform certain activities but would not curb Goldman’s broader business. The expected plea was first reported by The Wall Street Journal.
Malaysian and US authorities have both alleged that the Wall Street bank should have done more to prevent the looting of billions of dollars of the $6.5bn it helped Malaysia to raise for economic development between 2012 and 2013. They have also questioned the $600m fee Goldman was paid for its services, which was well in excess of industry norms.
A potential $2bn-plus settlement with the DoJ was first reported by Bloomberg on Monday. The headline number on the global settlement will probably be closer to $3bn because it may also include some of the $3.9bn settlement Goldman agreed with authorities in Malaysia earlier this year, two of the people said.
Two of Goldman’s former bankers also have been charged in an elaborate money laundering and bribery scheme that channelled billions from a state investment fund known as 1Malaysia Development Berhad into everything from expensive art to financing the Oscar-nominated film The Wolf of Wall Street.
Goldman has previously maintained it was deceived by its bankers and had no culpability for the scheme. David Solomon, its chief executive, apologised to “the people of Malaysia” in early 2019.
The investment bank has also been engaged with the Federal Reserve and regulators in the UK, Hong Kong and Singapore on the issue and is expected to announce those settlements along with the DoJ one. The DoJ is expected to get the lion’s share of the additional penalty, one of the people said.
The composition of the $2bn-plus in additional penalties is unclear. The Malaysian settlement included a cash payment of $2.5bn and a guarantee that Kuala Lumpur would receive at least $1.4bn from the sale of seized assets bought with misappropriated funds.
Goldman set aside an extra $2bn of legal charges to deal with 1MDB in the second quarter of the year, right after the Malaysian deal was struck. This week’s deal is unlikely to result in significant further provisions since it is roughly in line with what the bank and analysts expected.
The 1MDB scandal was a major drag on Goldman’s share price when Mr Solomon became chief executive in late 2018, and he initially hoped to put it behind the bank in his first year. Investors viewed the issue as largely resolved after the Malaysian settlement, and 1MDB did not feature at all on Goldman’s third-quarter earnings call last week.
One former Goldman banker, Tim Leissner, has pleaded guilty to US money laundering charges in the case. Another, Roger Ng, has pleaded not guilty and is awaiting trial.
Jho Low, the Malaysian financier allegedly at the centre of the scheme, is facing criminal charges in Malaysia and remains at large. Mr Low has denied wrongdoing.
Goldman Sachs, the Federal Reserve, the DoJ and the Monetary Authority of Singapore all declined to comment.