KUALA LUMPUR – Malaysia imposed on Wednesday a fine of $535,000 on auditor Deloitte for committing at least four breaches in auditing the issuance of Islamic bonds by a scandal-ridden state fund.
The Securities Commission Malaysia in a statement said Deloitte was reprimanded because it failed to report the irregularities detected in the Sukuk Murabahah Programme bonds issued by Bandar Malaysia Sdn Bhd.
Sukuk is Arabic name for financial certificates and the term is also used to refer to bonds that comply with sharia or Islamic code.
Deloitte was the statutory auditor for BMSB and its holding company 1Malaysia Development Berhad Real Estate (a subsidiary of state fund 1Malaysia Development Berhad) for financial years ended March 2015 and 2016 when the bonds were issued.
The securities regulator said Deloitte’s failure to immediately report irregularities may have a material effect on the ability of BMSB to fulfill its obligations in repaying sukukholders any amount under the program.
Imposing a fine of 2.2 million ringgit ($535,000) fine, the regulator said it “finds the breaches committed by Deloitte serious in nature as it has failed to discharge its statutory obligations.”
Malaysia’s former prime minister Najib Razak set up 2.4 billion ringgit 1MDB in 2009 as a state investment fund dedicated to attract investment projects and beneficial developments for the country. The fund ended up accumulating losses of 42 billion ringgit (about $9 billion).
The corruption scandal at 1MDB, which is overseen by the country’s finance ministry, was uncovered in 2015 when several media revealed the diversion of 2.6 billion ringgit to Najib’s private accounts.
Najib, who was in power from 2009 to 2018, denied the accusation, saying the money was a donation from a Saudi prince.
The scandal cost him the general elections in May last year. His successor Mahathir Mohamad reopened investigations on 1MDB.
Najib faces 38 charges of graft in court and his wife Rosmah Mansor, 17.
The United States Department of Justice estimates that about $4.5 billion was diverted from the 1MDB, $1 billion of which may have been laundered in the country with the purchase of real estate, yachts, jewelry, and works of art among other goods.