MUMBAI: Goldman Sachs got off lightly for its role in the 1MDB mess. That's one conclusion from a punishment meted out on Friday relating to the sovereign wealth fund scandal.
Kuala Lumpur-based banking group AMMB, part-owned by Australia's ANZ and more commonly known as AmBank, is paying the Malaysian government nearly $700 million to settle an investigation into its role in the affair. That equates to a whopping 30% of its market value, or more than four times the ratio the Wall Street firm led by David Solomon has agreed with authorities around the world.
It's a relatively harsh deal for an institution that was not a headline-grabbing actor in the multi-billion-dollar money-laundering fiasco, which the US Department of Justice described as "kleptocracy at its worst". By contrast, Goldman's total payment of $5.1 billion was barely 7% of the bank's market capitalisation last October when the DOJ unveiled its deferred prosecution agreement with the company.
The two banks played different alleged roles. While Goldman earned about $600 million in fees and commissions helping 1MDB raise $6.5 billion, part of which was misappropriated, one of AmBank's units held a secret personal account for then-Prime Minister Najib Razak. Najib received a suspect $700 million credit in 2013 which authorities that served under him subsequently declared a "gift" from the royal family in Saudi Arabia. He has since been found guilty of corruption.
Analysts at investment bank Jefferies summed up the shock, describing an "unexpected huge penalty". That might be a slight overstatement, but to conserve capital the bank won't pay a final dividend for the year. Shareholders are being given time to digest the news: AmBank's stock will remain suspended through at least Tuesday.
Domestic politics may be at play, and the pandemic is piling pressure on politicians to ease the various financial burdens on the economy.
To that extent, the Malaysian lender's misery is an ominous warning for other global banks yet to draw a line under their roles in the scandal.
Deutsche Bank, for example, helped 1MDB to raise money after Goldman courted a fee controversy.
In a world where fines handed out to banks so often seem to be inadequate punishment for wrongdoing, AmBank's stands out from the crowd.