FCA and PRA Fines Goldman Sachs $126m for the 1MDB Scandal

The UK regulator FCA and PRA (the Prudential Regulation Authority) have fined Goldman Sachs International (GSI), a subsidiary of the Goldman Sachs Group, Inc. ("Goldman Sachs"), a total of $126 million for risk management failures connected to 1Malaysia Development Berhad (1MDB), a Malaysian state-owned development company convicted of billion-dollar embezzlement, and its role in 3 fund raising transactions for 1MDB. 

In 2012 and 2013, GSI underwrote, purchased, and arranged 3 bond transactions for 1MDB that involved clients and counterparties in jurisdictions with higher financial crime risk and raised a total of US$6.5 billion for the company. GSI was aware of the risk of involvement of a third party that it had serious concerns about, but the company failed to assess and manage risk to the required standard and assess risk factors on a sufficiently holistic basis. 

GSI agreed to resolve this case with the FCA and PRA, qualifying it for a 30% discount in the overall penalty imposed by both regulators. Without this discount, the FCA and PRA would have imposed a financial penalty of $90,000,000 each on GSI.

The FCA and PRA fines are part of a $2.9 billion globally coordinated resolution reached with Goldman Sachs and its subsidiaries. As Fazzaco reported last Friday, the Securities and Futures Commission (SFC) of Hong Kong, among other regulators, also fined Goldman Sachs' subsidiary, Goldman Sachs (Asia) L.L.C., $350 million for the 1MDB Scandal.