ANTI CORRUPTION

The Real Wolves of Wall Street

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The banks, lawyers and auditors at the heart of Malaysia’s biggest corruption scandal

In Leonardo DiCaprio’s accep­tance speech after win­ning a Golden Globe in 2014 for his role in The Wolf of Wall Street, he thanked the pro­duc­tion team for the film includ­ing his col­lab­o­ra­tors “Riz and Jho”.1

Six months lat­er, the US Department of Justice (DoJ) announced that these two indi­vid­u­als – Riza Aziz and Jho Low – were at the cen­tre of a mul­ti-bil­lion-dol­lar cor­rup­tion scan­dal. It claimed that Aziz had financed The Wolf of Wall Street with mon­ey embez­zled from a Malaysian gov­ern­ment-owned com­pa­ny called 1MDB.

Leonardo Di Caprio and Jho Low at the French pre­miere of The Wolf of Wall Street.Bertrand Rindoff Petroff/Getty Images

The sto­ry of how these two Malaysian busi­ness­men and their asso­ciates appar­ent­ly embez­zled bil­lions to fund lav­ish lifestyles and Hollywood films is a plot wor­thy of a film of its own. It’s a sto­ry of mega-yachts, lux­u­ry prop­er­ties and mul­ti-mil­lion-dol­lar gam­bling trips. It briefly pro­mot­ed Low into the world of glob­al celebri­ties, earn­ing him a rep­u­ta­tion as a par­ty ani­mal.2 Paris Hilton was pho­tographed going club­bing with Low and pos­ing top­less on his yacht in Saint-Tropez.3 Low also report­ed­ly dat­ed the mod­el Miranda Kerr and used mon­ey from 1MDB to buy her over $7 mil­lion worth of jew­ellery.4

Jho Low and Paris Hilton in Paris in 2010.
Goff Images

But it’s not just a sto­ry of glitz and glam­our. It’s also a sto­ry of major banks and New York lawyers fail­ing to pre­vent the flow of bil­lions of dol­lars of dirty cash. And while all of this was hap­pen­ing 1MDB’s finances were giv­en a clean bill of health by some of the world’s most pres­ti­gious audi­tors.

At Global Witness, we have been cam­paign­ing to tack­le the role of pro­fes­sion­als who enable cor­rup­tion for near­ly ten years, and this is one of the largest and bold­est cas­es we have seen. Yet while this case’s sheer size is excep­tion­al, there is noth­ing unique about the ways in which those involved were able to laun­der the pro­ceeds through the inter­na­tion­al finan­cial sys­tem.

This analy­sis reveals for the first time the unique insights this case gives into how finan­cial pro­fes­sion­als enable high-lev­el cor­rup­tion. In many ways this analy­sis, by fol­low­ing one com­plex case in foren­sic detail, sheds far more light on this sys­tem than the vast range of less detailed rev­e­la­tions from the Panama Papers and Paradise Papers. This analy­sis does not try to cov­er the full sto­ry of the scan­dal, or of every bank or lawyer involved, but focus­es on some of the most sig­nif­i­cant play­ers in the 1MDB scan­dal to reveal insights about the state of the inter­na­tion­al finan­cial sys­tem.

A glob­al anti-mon­ey laun­der­ing sys­tem exists to pre­vent the laun­der­ing of the pro­ceeds of crime through the inter­na­tion­al finan­cial sys­tem. This costs banks and oth­er finan­cial pro­fes­sion­als around $8 bil­lion per year.5 Yet as expen­sive as this sys­tem is, it is not near­ly as effec­tive as it needs to be. The UN esti­mates that law enforce­ment seize and freeze less than 1% of crim­i­nal funds laun­dered through the inter­na­tion­al finan­cial sys­tem.6

These rules are there for a rea­son. Behind every flow of laun­dered funds lies a crime, and those crimes have vic­tims.

It now appears like­ly that 1MDB will fail to repay its debts, giv­en the scale of embez­zle­ment alleged to have tak­en place. If that hap­pens, the Malaysian gov­ern­ment will face a bill greater than the country’s annu­al health­care bud­get.7 In the end, the peo­ple of Malaysia will pay the price.

So how did these Malaysian busi­ness­men man­age to laun­der bil­lions of dol­lars from a gov­ern­ment-owned com­pa­ny through the inter­na­tion­al finan­cial sys­tem, as the DoJ alleges? Are the banks, lawyers and audi­tors involved the real wolves of Wall Street – will­ing to put moral­i­ty and the law aside for their pur­suit of prof­it – or are the rules just not fit for pur­pose?

Leondardo DiCaprio in The Wolf of Wall Street, which was financed with mon­ey tak­en from 1MDB.
Mary Cybulski / © Paramount Pictures / cour­tesy Everett Collection / Mary Evans

This analy­sis will show that for the banks involved, this was not a prob­lem of inad­e­quate reg­u­la­tions — it was a clear fail­ure of those banks to fol­low the rules. The exist­ing reg­u­la­tions should have pre­vent­ed the embez­zle­ment of these bil­lions of dol­lars, yet the banks ignored the rules, turned a blind eye, kept prof­itable clients and con­tin­ued han­dling bil­lions of dol­lars of dirty mon­ey despite clear warn­ing signs. 

This does not mean that the rules are per­fect. The lawyers involved han­dled hun­dreds of mil­lions of dol­lars from the scheme, yet were nev­er required by law to do any checks on that mon­ey. The audi­tors that gave 1MDB a clean bill of health were nev­er required to blow the whis­tle despite the increas­ing­ly sus­pect excus­es giv­en for the where­abouts of 1MDB’s bil­lions. 

Ultimately, this is a sto­ry where almost no one involved comes out look­ing good. It is a sto­ry of the fail­ure of the sys­tem designed to pre­vent cor­rup­tion on such an enor­mous scale. However, that sto­ry also shows where and how action is need­ed to make sure such scan­dals nev­er hap­pen again.

The Real Wolves of Wall Street

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