Fixing Everything But What’s Broken: Malaysia after the 1MDB Scandal

The Malaysian 1MDB scandal sparked the largest investigation in the history of the U.S. Department of Justice Kleptocracy Asset Recovery Initiative and has revealed serious problems with Malaysia’s anticorruption infrastructure. The DOJ has filed civil forfeiture claims for $1.7 billion in assets obtained with funds diverted from 1MDB, a sovereign wealth fund ostensibly intended to promote economic development in Malaysia. The money ended up in a stunning variety of locations around the globe. Nearly $700 million found its way into the Malaysian Prime Minister’s personal bank accounts. His stepson’s production company suddenly had the funds needed to back the Hollywood movie The Wolf of Wall Street. A financier with close ties to the government bought an Australian model jewels worth $8.1 million.

Meanwhile, the Malaysian government insists there is nothing to see here. The newly-installed Malaysian Attorney General cleared Prime Minister Najib Razak of all wrongdoing and put a stop to the investigation by the independent Malaysian Anti-Corruption Commission (MACC). As an earlier post explained, the previous Attorney General, who headed an inter-agency task force investigating the 1MDB scandal, resigned under suspicious circumstances, and Najib appointed his replacement. Najib also replaced several cabinet members who had called for investigations into 1MDB. The breakdown of justice in the 1MDB scandal may seem all the more surprising to outside observers, since Malaysia had appeared to be making strides in addressing its corruption problem, and the MACC—which was founded in 2009 and modeled on Hong Kong’s Independent Commission Against Corruption—had received fairly good reviews (see here, here, and here).

In the wake of the 1MDB scandal, there have been a variety of proposals for improving Malaysia’s anticorruption efforts. Most of these proposals, especially those emanating from the government, involve a flurry of activity and the creation of new anticorruption institutions. For example, the government has recently proposed creating a new National Integrity and Good Governance Department. The Malaysian Bar has called for the establishment of an Independent Anti-Corruption Commission (IACC) to provide oversight for MACC. The MACC itself, despite its inaction on 1MDB, is ramping up other anticorruption campaigns. This all fits an unfortunate pattern in Malaysia: creating lots of new agencies or new structures, or undertaking other actions that make the government “look busy,” but that don’t actually get to the heart of the main problem: the lack of a politically independent anticorruption prosecutor. 

Malaysian administrations have created an alphabet soup of anticorruption agencies and institutions, partly because each incoming Prime Minister touts his own, new anticorruption policies rather than strengthening existing ones. The MACC itself is a 2009 upgrade to Malaysia’s previous Anti-Corruption Agency (ACA), which had been around since 1967. Several other agencies investigate public complaints of corruption, including the Integrity Institute, the Public Complaints Board, the Enforcement Agency Integrity Commission, and the Integrity Unites in various government agencies. The MACC already has an extensive oversight structure. In addition to this proliferation of agencies, the Malaysian government also has the habit of making lofty anticorruption promises—including those in a 2004 National Integrity Plan (NIP) —that now seem painfully ironic post-1MDB.

The government is certainly talking the talk of anticorruption. But walking the walk would take one simple action: giving the MACC independent prosecutorial power. Under the current law, the MACC can investigate corruption, but the decision whether to prosecute offenders is left up to the politically-appointed Attorney General. And Najib’s ability to stop the 1MDB investigation by replacing the Attorney General reveals how easy it is for the executive to hamstring the MACC, leaving it powerless in the face of grand corruption. Not surprisingly, Najib’s government is not eager to close the loophole that has allowed it to escape domestic prosecution over 1MDB. It’s hard to see the other anticorruption “reforms” touted by the government as anything other than an attempt to misdirect the public’s attention, given the glaring 1MDB issue and the steps Najib took to prevent any action by the MACC.

Anticorruption reform efforts in Malaysia should prioritize, above all else, reforms that would give the MACC independent prosecutorial power. Indeed, leading civil society organizations, including Transparency International Malaysia and the Center to Combat Corruption and Cronyism (C4), have rightly focused on calling for the MACC to have truly independent power to investigate and prosecute, free from executive influence. Any other reform efforts are distractions more likely to result in a proliferation of agencies and mere lip-service to integrity. Malaysia has more than enough of both.

4 thoughts on “Fixing Everything But What’s Broken: Malaysia after the 1MDB Scandal

  1. Thanks for the great post, Liz! I cannot agree more that prosecutorial power should be given to MACC. But then there are issues regarding immunizing MACC from corruption during its operation, and issues of guaranteeing MACC’s independence and impartiality. Do you think then IACC’s establishment would make better sense? But then there are problems of keeping IACC in check… What do you see would be a better way to supervise all those agencies? I know it’s a hard question- I haven’t a clue either – but it is definitely an important question for us to answer.

    • Hi Helen, you’re absolutely right to point out the way that anti-corruption solutions can start to seem like matryoshka dolls, each agency needing another independent agency to supervise it with no end in sight. I’m also at a loss for how to ensure that MACC doesn’t get infested with corruption. Stay tuned for a possible upcoming post about deeper structural issues in Malaysia that lead to corruption. I strongly suspect that until those in power in Malaysia start to see a real possibility of getting voted out, corruption will continue. I’m not sure when Malaysia’s political tides will change sufficiently for that to happen.

    • I’m also deeply disturbed by Trump’s apparent indifference to Najib’s role in the 1MDB scandal and the damaging message it sends to be hobnobbing with him. I would worry, especially, about the undeserved credibility a warm international reception anywhere may lend Najib at home. That said, I haven’t seen news any reports that the DOJ investigation is letting up or changing course.

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