AmBank is struggling to shake off its association with former Malaysian prime minister Najib Razak and the 1MDB scandal
Malaysia’s AmBank makes no secret of its strengths.
“We are very good in two types of markets; the high end, which is the people who are very rich, and the mass”, an executive tells Asiamoney as she outlines the bank’s mission to cut overheads by migrating its older, less tech-savvy clientele to a new app. “We have a whole lot of people who are rich in the older demographic.”
But it’s an unwitting description of a deeper, embarrassing truth that has dogged AmBank in recent years.
As Malaysians have come to know all too well, AmBank’s best-known legacy customer happens to be an extremely rich, elderly man who is notorious for the hundreds of millions that sloshed through his AmBank accounts; these sums amounted to many multiples of his official RM22,827 ($5,470) monthly salary during the nine years from 2009 to 2018 when he was Malaysia’s most powerful man.
That customer is Malaysia’s former prime minister Najib Razak, whose accounts were held at AmBank’s branch in downtown Kuala Lumpur on Jalan Raja Chulan. Malaysians know that because Najib is on trial in Kuala Lumpur for alleged industrial-scale corruption in relation to the $1.6 billion plunder of 1MDB, the state-owned investment company that he chaired as prime minister.
This year, AmBank has endured a torrent of embarrassing revelations aired in testimony before Malaysia’s High Court about how it handled Najib and his Malaysian associate Low Taek Jho, aka Jho Low, the alleged mastermind of the 1MDB fraud who is believed to have fled to China.
Najib and two other members of his family, notably his handbag-loving wife Rosmah, now face 70 criminal charges between them, charges they deny. Najib alone has 38 accusations levelled against him, and is accused by government prosecutors of criminal breach of trust relating to almost $1.6 billion of state funds. He has pleaded not guilty to all charges.
AmBank has endured a torrent of embarrassing revelations aired in testimony before Malaysia’s High Court about how it handled Najib and his Malaysian associate Low Taek Jho, the alleged mastermind of the 1MDB fraud
As for those who constitute Malaysia’s mass market, cited by the AmBank executive, many became so incensed by AmBank’s rich old customer Najib, a man they dubbed ‘Lord of the Ringgits,’ that they overthrew him in elections last year after details of the 1MDB looting became known.
Najib’s United Malays National Organization (Umno) lost power for the first time in independent Malaysia’s 61-year history, returning the country’s 92-year-old political warhorse Mahathir Mohamad to a second stint as PM.
Since 2015, Malaysia’s sixth-biggest bank has struggled to overcome the ignominy of facilitating what the US Justice Department described as “kleptocracy at its worst” through 2014 and 2015.
Indeed, for AmBank, 2015 turned out to a particularly bad year. At the very end of 2014 its then chief executive, Australian Ashok Ramamurthy, suddenly resigned and hurriedly left Malaysia. In July, AmBank was raided by investigators from Malaysia’s central Bank Negara, who seized phones, data drives and internal emails.
Through July to September that year, AmBank’s share price went into freefall, slumping 28%, despite having reported 8% higher profits in the full year to the end of March 2015.
In November, AmBank revealed it had been fined RM53.7 million by Bank Negara for “non-compliance with certain regulations.” Soon after, it had a new boss, Sulaiman bin Mohamed Tahir, a long-time staffer at rival bank CIMB who joined AmBank after serving just four months as CIMB’s chief executive.
Four years on, details of that difficult year are only starting to emerge. AmBank continues to improve profits, but that performance is not reflected in its share price, which at RM4.16 remains defiantly below the RM4.30 depth it plumbed in 2015.
The bank has only partially admitted that it had “compliance issues” in 2015, without publicly explaining why and what they were.
Indeed, AmBank seems to be in denial about its pivotal role in the 1MDB scam; its reluctance to publicly confront its role in the corruption scandal is at odds with the new openness that has swept Malaysia since the 2018 elections.
Now almost four years into the job, AmBank’s Tahir still seems reluctant to address how the firm is getting over its 1MDB nightmare, as the market is constantly reminded of critical failings in its internal systems and compliance.
Through July to September, as fresh revelations about AmBank’s links with Najib and Jho Low were aired in court, Asiamoney made repeated requests to meet Tahir so he could outline the measures taken to restore normalcy at AmBank, but the bank did not set up a meeting.
State investigators continue to pore over the 1MDB matter: in August, the Malaysian government’s attorney-general Tommy Thomas announced he would be seeking custodial sentences and criminal fines for 17 former and current executives of the US investment bank Goldman Sachs for its role in 1MDB’s financing.
The raid on AmBank’s branch on Jalan Raja Chulan in Kuala Lumpur by investigators from Bank Negara on July 6, 2015, was part of an investigation under Malaysia’s anti-money laundering, anti-terrorism financing and proceeds of unlawful activities act. The raid was not announced at the time; Malaysians only knew it had taken place via unofficial social media chatter and later, in media reports and court hearings after Najib had lost power.
A few days before the raid took place, international media had reported that about $700 million had been channelled into Najib’s AmBank accounts. Leaked official documents were published showing that as much as $700 million had moved through 1MDB-linked entities to end up in Najib’s personal bank account at AmBank.
Najib claimed the money was a donation from a “generous” unnamed Middle Eastern supporter. Many Malaysians were unconvinced.
AmBank did not consider it necessary to advise the Malaysian stock exchange, where the bank’s holding company is listed, of the raid at the time. But more than four months later, on November 23, 2015, AmBank revealed in a stock exchange filing that it had been fined RM53.7 million by Bank Negara for “non-compliance with certain regulations”.
A day later, the exchange asked AmBank to elaborate on the offence and on November 27, AmBank said the penalty was “because of weaknesses in our reporting systems and processes in place at the time, as well as inadequate skills on the part of some of our staff.”
It added that the central bank “had not placed any restrictions” on AmBank’s business.
At no time did AmBank mention Najib or anything 1MDB-related, but said that the penalty would have “no material impact on AmBank Group’s earnings for the financial year ending March 31, 2016.”
Leaked official documents were published showing that as much as $700 million had moved through 1MDB-linked entities to end up in Najib’s personal bank account at AmBank
On the same day – November 23, 2015 – that AmBank revealed its fine for compliance failures, Tahir’s appointment as chief executive was announced. (Asiamoney asked AmBank if settling the fine was a condition of Tahir joining the bank, but it did not respond.)
At the time, it was widely speculated across Malaysia’s lively online forums that AmBank’s fine was related to Najib’s accounts at 1MDB. But it was only after a change of government and Najib’s removal from power and replacement by Mahathir in May 2018 that the bank addressed the matter publicly.
At an AmBank quarterly results press conference in May 2018, Tahir addressed the 2015 fine in the context of Najib and 1MDB. Tahir was pressed about how cooperative AmBank was being with the Mahathir government’s newly invigorated investigations into 1MDB and Najib.
“We were one of the first to be fined, and I think we paid the biggest fine that has ever been paid by a Malaysian bank,” local media reported Tahir as saying, adding that he said that “as far as Bank Negara Malaysia is concerned, we have been an open book.”
Tahir’s move to AmBank had come as a surprise in KL’s tight-knit banking circles. Tahir had worked at CIMB – where Najib’s brother Nazir was chairman – since the 1980s, but had only been CIMB’s chief executive for four months when his appointment as AmBank CEO was first mooted in August 2015, just one month after Bank Negara raided AmBank.
The AmBank top job had been open since January 2015 when Ramamurthy suddenly left Malaysia to return to Australia. Ramamurthy had been appointed in 2012, thanks to Australian bank ANZ’s 24% stake in AmBank, a relationship that at the time gave ANZ a say in who ran AmBank.
AmBank claimed Ramamurthy’s exit was planned, and that he was keen to return to Australia for family reasons. But influential Malaysian politician Rafizi Ramli, now the vice-president of Keadilan, the People’s Justice Party that is the largest member of the current ruling coalition, told Euromoney in 2015 that Ramamurthy’s resignation was 1MDB-related, concerning a large loan to a 1MDB-owned property development in Kuala Lumpur.
Recent court testimony by a former AmBank employee also casts doubt on the reasons given by AmBank for Ramamurthy’s resignation. Ramamurthy left ANZ soon after returning to Australia, and his LinkedIn profile describes him as retired since June 2015. He did not respond to attempts to reach him.
Perhaps it was not surprising if people didn’t want to talk given the climate of fear at the time. There were several suspicious crimes, deaths and murders during this period. In July 2013, AmBank’s founder Hussain Najadi was gunned down in central KL: his son Pascal Najadi has claimed his father died for exposing corruption in Malaysia.
Much more has come to light about AmBank, Najib and 1MDB in recent months thanks to the court hearings – reported by local media – that have run since April in what is billed as Malaysia’s ‘trial of the century’.
Various current and former AmBankers have testified at the High Court about how they handled the financial affairs of their client Najib, who became known within the bank as ‘Optimus Prime’ (the US Justice Department, which conducted its own 1MDB investigation, called him ‘Malaysian Official Number 1’).
These court testimonies have been particularly embarrassing for AmBank. According to local media transcripts of the court hearings, former AmBank managing director, Cheah Tek Kuang, described how in 2011 he had gone to Najib’s residence in suburban Kuala Lumpur to discuss the opening of Najib’s accounts at AmBank.
At Najib’s house, Cheah testified that he met Jho Low, the financier who has been identified by state investigators as the mastermind of the alleged 1MDB fraud.
Cheah told the court that Najib had told him that he wanted to open the accounts because he was about to receive a donation, citing amounts of $100 million and $200 million.
He said the code name ‘AmPrivate Banking-MR’ was used for Najib’s account instead of his real name in order to conceal it, and that Jho Low had requested it be handled with the strictest confidentiality.
Arguably the most damning evidence has come from AmBank’s private bank relationship manager Joanna Yu. In sometimes tearful testimony over several days, Yu testified how she had been contacted by Jho Low in January 2011 about setting up accounts for Najib.
She told the court that Jho Low was her biggest client and one of AmBank’s biggest clients. She said she maintained contact with Jho Low via Blackberry Messenger, and described the code words he used to advise her of imminent transactions; ‘American pies’ and ‘chips’ for US dollars, and ‘satay’ for Malaysian ringgit.
At one point, Yu described to the court how Jho Low was a problem solver for Najib, or MNR (Mohammed Najib Razak) as he was known in her smartphone chat logs with Jho Low.
The court heard details of how Jho Low handled Najib’s accounts at AmBank. According to Yu’s testimony, when Najib tried to make a $100,000 purchase in a Chanel boutique in Hawaii on his AmBank credit cards in December 2014, the transaction was rejected.
The following message to Jho was read out in court: “My platinum cards are not going through Jho. Can you call AmBank Visa and Mastercard right away? Thanks.”
The court reportedly heard that Jho Low forwarded it to Yu. Jho Low told Yu that it was “from MNR, pls help asap?”
Yu confirmed that “MNR” in the message referred to Najib, and read out the logged chat exchange she had with Jho Low:
Yu: Aiyo [a dialect expression of irritation]... our stupid card system down. Will check
Low: Chk asap pls. He is chasing
Yu: Yep called them already. Asking card guys to look into it immediately
Low: Urgent. He is in Hawaii and wants to charge US$100k
Yu: System ok work. They asked to try again. They are on standby to clear transaction
Low: It will work? They checked his card works?
Yu: They checked and it seems ok
Yu: From what they can see
Low: US$100k one transaction no problem?
Yu: No problem. His limit is RM3 million
Yu told the trial that Jho Low insisted that Najib’s credit card statements should never be sent to his residence because it was “super sensitive” and that Jho Low would arrange for these to be collected.
She said Jho Low told her not to disclose Najib’s name whenever funds had come into his AmBank account. On July 22, Yu testified that from June 2014 to May 2015, some RM12.379 billion was deposited into Najib’s two AmBank accounts.
A week later, Yu also testified that $369.99 million had also been paid into Najib’s account in a series of transactions between 2011 and 2013.
Yu told the court that Jho Low was not happy when Ramamurthy raised the issue of the large transfers into Najib’s bank accounts with the bank’s board.
The court has also heard how Najib’s relationship manager herself topped up his account when it went overdrawn. At one point in 2014, the court heard that a Najib account at AmBank didn’t have sufficient funds to honour a RM80,000 transaction. Chat logs indicate that Yu made up the balance from her own money before being paid back the next day by Jho Low’s secretary.
Yu said that after the Bank Negara raid on AmBank’s Raja Chulan branch in July 2015, she came under pressure to resign.
Few bank chief executives would relish seeing such evidence about their bank’s internal workings made public. Indeed, around the time Yu and other AmBank employees were giving evidence to the Najib trial, Tahir seemed to go on a local charm offensive in KL.
In an interview with local financial newspaper The Edge in July, he insisted that the evidence emerging during Najib’s corruption trials over alleged crimes committed using AmBank accounts had not impacted the bank’s business.
The newspaper reported Tahir as saying that AmBank had taken measures to prevent the breach of regulations from occurring again.
“Much has been done to improve and enhance our processes and internal systems to ensure that we will not have a repeat of non-compliance,” he told The Edge.
“In addition, AmBank agreed with Bank Negara to commence a four-year programme during which we have set aside RM25 million per annum for investment in systems, infrastructure and training.
“This series of measures will enhance the robustness of our processes and is intended to ensure that such circumstances will not happen again in the future.” Tahir has also cited AmBank’s strong results for the year ending March 31, 2019, when the bank reported that profits rose 32.9% to RM1.5 billion.
AmBank’s connection to the toxic 1MDB, and the subsequent fallout, has impacted the business. It is cited as one of the factors contributing to the 2017 collapse of a proposed $9 billion merger
AmBank’s connection to the toxic 1MDB, and the subsequent fallout, has impacted the business. It is cited as one of the factors contributing to the 2017 collapse of a proposed $9 billion merger, regarded in the market as more a takeover by a dominant RHB of a weakened AmBank, which would have created Malaysia’s fourth-biggest bank after Maybank, CIMB and Public Bank.
After Tahir declined to be interviewed by Asiamoney, we sent a detailed series of questions to AmBank relating to its connections to 1MDB, Najib and Jho Low and about the impact of Bank Negara’s 2015 raid, investigation and fine. AmBank did not answer these questions, claiming their tone was ‘strong and unnecessary,’ and instead responded with a general statement.
The bank’s corporate communications department said: “It would be sub judice for the AmBank Group to comment” on ongoing court cases. “We are also precluded by issues of banking secrecy to discuss matters concerning any account whether past or present.”
But, four years on, and after what finance minister Lim Guan Eng described as Malaysia’s Berlin Wall moment in toppling the autocratic Umno-led regime, AmBank still seems reluctant to provide full disclosure.
“Suffice to note that the AmBank Group was fined by Bank Negara Malaysia for non-compliance to a specific reporting requirement,” the bank says. “We provided our full cooperation and compliance with the authorities and regulators during the course of the investigations. The investigations were completed in 2015.
“Since then, much has been done to improve our processes and internal systems to ensure that we have stronger prevention and detection measures to avoid similar non-compliance issues,” the statement claims. “Four years on, we are clearly no longer the same financial institution that was fined in 2015, we have clearly progressed as per plan and will continue to build our financials.”
But as investigators continue to unearth evidence – in August, the High Court heard that AmBank documents had been seized by Malaysia’s Anti-Corruption Commission – AmBank’s 1MDB nightmare looks far from over.