The limits of control

Swiss 1MDB probe holds fat tail risks for Malaysia

It's hard to bury a big scandal. That is the awkward lesson that Najib Razak is learning. The Malaysian prime minister is attempting to draw a line under a multi-pronged financial controversy that almost toppled him. But initial findings from Switzerland's attorney general that around $4 billion may have been misappropriated from Malaysian state firms is a sharp reminder of the lingering threat posed by foreign investigations.

Even by the standards of Malaysian politics, it has been an extraordinary few days. On January 26, the country's chief prosecutor concluded that $681 million that was transferred into the prime minister's personal account in 2013 was a donation from the royal family in Saudi Arabia, not money from 1Malaysia Development Berhad, an indebted fund he championed. Najib was cleared of graft. Three days later, however, Swiss authorities published preliminary conclusions from its own probe into 1MDB which found that billions may have been squirrelled away between 2009 and 2013.

The Swiss findings implicate former Malaysian officials and current and former ones in the United Arab Emirates. Four companies are in the frame: PetroSaudi, a privately-held Saudi oil company; former 1MDB subsidiary SRC International; Malaysian conglomerate Genting, and ADMIC, a joint venture with Aabar Investments - which is ultimately backed by Abu Dhabi royal Sheikh Mansour bin Zayed al-Nahyan. The findings are also uncomfortable for Goldman Sachs as the Wall Street bank, which helped raised $6.5 billion for 1MDB, was closely involved with two of these entities.

However, Najib himself does not appear to be the focus of the inquiry. It is highly doubtful that any of the four ongoing Malaysian probes into 1MDB will result in any outcome that hurts the prime minister. After all, the present attorney general's predecessor was axed by Najib at the height of the funding furore.

The happiest outcome for Najib would be for the investigations in Switzerland and elsewhere to also fizzle out. Malaysia says it will cooperate with its Swiss counterparts. Yet foreign investigators' dependence on domestic help has helped to stymie past inquiries, including a more than decade-long probe into alleged money laundering by former president of Pakistan Asif Ali Zardari and his late wife former Prime Minister Benazir Bhutto - both of whom always denied the charges.

Najib still has the domestic support he needs to stay on top. But the foreign probes into 1MDB are a continued embarrassment at best. At worst, further revelations could prove a fat tail risk for the prime minister - and for Malaysia.