Issue #11 | July 7, 2026 | 7 min read
SECTION 1: The Brief
Goldman Sachs earned roughly $600 million underwriting three bond offerings for 1Malaysia Development Berhad between 2012 and 2013. Over that same stretch, senior officials at the fund and their associates were siphoning off billions of it. Two Goldman bankers didn't miss the risk. They circumvented the firm's own internal accounting controls to get the deal done anyway.
This issue covers how $4.5 billion moved out of a sovereign wealth fund, what Goldman's fee structure should have told anyone paying attention, and why "the controls were bypassed" is a harder problem to fix than "the controls didn't exist."
SECTION 2: Main Feature
ENFORCEMENT ACTION
The $600 Million Fee That Should Have Been the First Red Flag
$4.5 billion stolen from a Malaysian sovereign wealth fund. A Hollywood movie, a superyacht, and a supermodel's jewelry paid for with the proceeds. And at the center of it, two Goldman Sachs bankers who circumvented their own firm's controls
1Malaysia Development Berhad was created in 2009 as a state investment fund chaired by then-Prime Minister Najib Razak, intended to drive economic development projects across Malaysia. Between 2009 and 2015, according to the Department of Justice, senior 1MDB officials, their associates, and a Malaysian financier named Jho Low misappropriated more than $4.5 billion from the fund through a scheme of embezzlement and international money laundering. Low never held a formal position at 1MDB. He was, in the DOJ's words, regularly consulted on the fund's biggest decisions anyway.
Goldman Sachs's role in that scheme is what makes this a compliance case rather than just a corruption story. In 2012 and 2013, Goldman underwrote three bond offerings for 1MDB worth roughly $6.5 billion combined and collected close to $600 million in fees for arranging them. Tim Leissner, Goldman's Southeast Asia chairman, and Roger Ng, a managing director, conspired to pay more than $1.6 billion in bribes to at least a dozen government officials in Malaysia and Abu Dhabi to win and retain that business. The DOJ's charges against Ng didn't stop at bribery. He was convicted of conspiring to violate the FCPA specifically by circumventing Goldman's own internal accounting controls. This wasn't a case where compliance missed something. Two men with enough seniority to do it routed around the process entirely.
$600 million - what Goldman earned underwriting the three 1MDB bond deals
$2.9 billion - what Goldman paid the DOJ and SEC in 2020 to resolve the case, the largest FCPA settlement on record at the time
$3.9 billion - a separate sum Goldman paid directly to the Malaysian government the same year to end the country's own criminal and regulatory proceedings
A fee structure like that doesn't happen by accident. Bond underwriting economics scale with risk and complexity, and $600 million on $6.5 billion in offerings for a sovereign-adjacent issuer is not a fee that reflects routine underwriting risk. It reflects a deal somebody had strong incentive to protect from scrutiny. Leissner pleaded guilty in 2018 to conspiring to launder money and violate the FCPA; he was sentenced to two years in prison in 2025 after years of cooperation. Ng went to trial, was convicted on all counts in 2022, and was sentenced to 10 years.
Red Flags in This Case
Underwriting fees far outside the range that deal size and credit profile would justify
Bond proceeds routed through shell companies immediately after settlement instead of flowing to the development projects the fund was created to finance
Senior relationship bankers personally overriding the firm's own internal accounting and deal-approval controls
A person with no formal role at the client organization directing or being consulted on its largest financial transactions
Proceeds surfacing in markets with no connection to the fund's stated purpose: film financing, luxury real estate, a 300-foot yacht, fine art, jewelry
Money moved out of 1MDB ended up financing The Wolf of Wall Street through Red Granite Pictures, a production company co-founded by Najib's stepson; buying the Equanimity, a superyacht later seized off Bali and sold for $126 million; and purchasing jewelry for a supermodel and paintings by Van Gogh and Monet. The DOJ's Kleptocracy Asset Recovery Initiative called 1MDB the largest case in the program's history, eventually recovering more than $1.7 billion in assets through 41 civil forfeiture actions.
The practitioner lesson here isn't about beneficial ownership or transaction monitoring. It's about what a compliance function does when the people it's supposed to check are the same people with the authority to approve the deal. A fee that's an outlier for the risk profile is a data point a deal-economics or capital markets compliance review should catch on its own, independent of whatever KYC has already cleared on the client. Whether that review has the standing to stop a managing director from closing a $2 billion bond deal is a separate, harder question, and it's the one Goldman's case actually answers. The compliance program never got the chance to say no. That's a different failure than a compliance program that said yes for the wrong reasons, and it needs a different fix: controls that can't be waived by the seniority of the person asking.
Sources: DOJ, "Goldman Sachs Charged in Foreign Bribery Case and Agrees to Pay Over $2.9 Billion," October 22, 2020 | DOJ EDNY, "Former Goldman Sachs Managing Director Sentenced to 10 Years in Prison for His Role in Massive Bribery and Money Laundering Scheme" | DOJ, "Justice Department Repatriates $1.4B Misappropriated 1MDB Funds to Malaysia" | Government of Malaysia / Goldman Sachs settlement announcement, July 24, 2020
SECTION 3: Intelligence Briefing
INTELLIGENCE BRIEFING
FinCEN / OFAC — On June 30, FinCEN issued a supplemental alert on fuel smuggling and Mexican tax evasion schemes tied to Cartel de Jalisco Nueva Generación and other cartel networks, alongside a coordinated OFAC sanctions action against two Mexican nationals and nine entities involved in the same fuel-smuggling infrastructure. The alert lays out red flag indicators for what Treasury calls "fiscal fuel theft" (smuggling US fuel into Mexico to exploit tax arbitrage) and reminds institutions of their BSA reporting obligations. A prior alert on the same typology generated more than 160 SARs describing over $7 billion in suspicious activity in the following year, mostly on the US-Mexico corridor. Source: FinCEN, "FinCEN Issues Supplemental Alert on Fuel Smuggling and Tax Evasion Schemes on the Southern Border Associated with Mexico-Based Cartels," June 30, 2026.
OFAC — On July 4, Treasury sanctioned Rosneft and Lukoil, Russia's two largest oil companies, citing Russia's lack of serious commitment to a ceasefire in Ukraine. Both firms are now designated, cutting off US-linked financial institutions from processing transactions connected to them absent a license. For institutions with any exposure to Russian energy trade financing, correspondent relationships, or commodity counterparties, this is a significant expansion of the sanctions perimeter and SDN screening lists should already reflect it. Source: Treasury press release, "Treasury Sanctions Major Russian Oil Companies," July 4, 2026.
OFAC — On May 28, Treasury removed 76 outdated entries from the SDN list as part of a broader sanctions modernization effort; deceased individuals, decommissioned vessels, and listings more than a decade old with insufficient identifiers for reliable screening. The number of new SDN listings grew from 880 in 2017 to over 3,000 in 2024, and Treasury has acknowledged institutions are spending real resources chasing low-risk false positives instead of high-risk evasion schemes. Practical effect for screening teams: expect periodic delisting batches going forward, not just new designations. Source: Treasury press release, "Treasury Begins Sanctions Modernization Effort by Removing Outdated Entries," May 28, 2026.
SECTION 4: From the Source
FROM THE SOURCE
"My team is implementing these transactions without really knowing what we are doing and why and I am uncomfortable with this. [...] there should be a stronger governance process around all this."
BSI, a Swiss private bank, moved 1MDB-linked funds for years without clarifying why hundreds of millions of dollars were flowing through accounts tied to a sovereign fund and politically exposed clients. In 2012, one of the bank's own employees told management, in writing, that the team executing these transactions didn't understand what it was doing. Management didn't act on it. Switzerland's FINMA later found BSI in serious breach of anti-money laundering regulations, and in 2016 Singapore shut down BSI's local operation entirely; the first time in more than 30 years its regulator had closed an international bank's unit in the country.
What makes this quote worth pulling isn't that an employee raised a concern. It's the specificity: not "this looks risky" but "we don't understand what we're doing or why." That's about as unambiguous as an internal warning gets, and it still didn't produce a governance response until a regulator forced one from outside.
Source: FINMA press release, "BSI in serious breach of money laundering regulations," May 24, 2016
SECTION 5: CTA Block
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