Two Abu Dhabi sovereign wealth funds embroiled in the 1MDB financial fraud have agreed to a $1.8 billion settlement with Malaysia’s sovereign wealth fund and the finance ministry to end a legal dispute in London.
Under the agreement announced on Monday, the International Petroleum Investment Company (Ipic) and Aabar will pay the agreed sum in three phases: $800 million within seven days of the end of London proceedings and the rest within two years. Executives at the Abu Dhabi firms were accused of facilitating the looting of billions of dollars from the Malaysian fund.
In 2018, Malaysia brought the proceedings to challenge a settlement reached with the UAE capital a year earlier when Najib Razak, the former prime minister at the heart of the 1MDB scandal, was still in office.
The 1MDB scandal, in which billions of dollars were siphoned from the Malaysian sovereign wealth fund, has reverberated around the world, led to Najib being ousted as prime minister and sparked a series of cases, including against Goldman Sachs.
Najib was sentenced to 12 years in prison in 2020 after the Kuala Lumpur High Court found him guilty of seven charges, including money laundering and abuse of power, in a high-profile case linked to the 1MDB embezzlement. The ruling was upheld by the Supreme Court last year.
In London, Malaysia had claimed that the original Abu Dhabi settlement had been entered into to cover up Najib’s “fraud and dishonesty”.
The settlement draws a line under a long-running dispute launched five years ago by Malaysia over 1MDB.
The scandal has been an embarrassment for Abu Dhabi, which announced in 2016 that Ipic and Aabar would be spun off into Mubadala, another state investment company. Mubadala declined to comment.
Khadem al-Qubaisi and Mohammed al-Husseiny, two top managers at Ipic and Aabar, have been convicted and imprisoned in Abu Dhabi for their role in the fraud.
The Malaysian Ministry of Finance said: “With this settlement, Malaysia and Abu Dhabi look forward to continue working together for the prosperity and economic benefits of both countries in the future.”
International Trade and Industry Minister Zafrul Aziz, who chaired the negotiations, said in a tweet: “The close relationship between the YDPA (King of Malaysia) and the President of the UAE was also an important factor in ensuring the success of the negotiations.”
The deal comes days after Prime Minister Anwar Ibrahim, voted into power in November, delivered a record budget of RM388 billion.
Anwar, who has also taken on the role of finance minister, inherited an economy still weighed down by the 1MDB scandal.
One of his biggest challenges is to restore Malaysia’s international reputation after the long-running corruption scandal. The fund is still subject to investigations into corruption and money laundering in several countries.
Anwar has also put pressure on US investment bank Goldman Sachs Group to honor its settlement amount to the government over its role in the scandal.