JPMorgan, Deutsche Bank Investigated Over 1MDB

The US Department of Justice has requested JPMorgan Chase & Co. (NYSE: JPM) and Deutsche Bank to produce their whole record of transactions with 1Malaysia Development Berhad. According to a reliable source familiar with the matter, the two banks have not yet been accused of any wrongdoing.

1Malaysia Development Berhad is a state investment fund that was accused of corruption and money laundering just recently. According to Bloomberg, JPMorgan Chase and Deutsche Bank are now being investigated if these two banks have facilitated bank transactions for 1Malaysia Development Berhad.

In addition, these two banks are scheduled to post their earnings results for the first quarter soon. Deutsche Bank has been subject to tremendous pressure because of the ongoing restructuring efforts, as well as the issues on the company’s debt. With this, investors would closely watch out for the current investigation as this may impact investor sentiment and result in a stock price movement.

Deutsche Bank offers loans and advisory services to 1Malaysia Development Berhad. The multinational bank lent $975 million in the year 2014, and advised on the IPO for its energy assets. During the previous year, the loan was repaid. However, according to the report of Fortune, the IPO was never offered.

On the other hand, JPMorgan acts as a clearing bank for Malaysian lenders in the United States. Because of this, JPMorgan has access to the transactions of 1Malaysia Development Berhad at least in the United States. Recently, investigators also probed the Malaysian Prime Minister Najib Razak into this case. The Malaysian Prime Minister has been accused of transferring $1 billion from the fund to his personal bank account. Razak also serves as the chairman of the advisory board of the fund. The Malaysian Prime Minister and the investment fund have denied such allegations.

Authorities all over the world resume to probe into the financial institutions of their country, in order to unravel any possible involvement in the corruption issue. Some of these countries include the United States, Singapore, Luxembourg, as well as Switzerland.

The Department of Justice of the United States is also investigating Goldman Sachs Group for underwriting $6.5 billion for this Malaysian fund. The former chairman of Goldman Sachs for Southeast Asia Mr. Tim Leissner has left the global bank in the middle of the 1Malaysia Development Berhad investigations. The Goldman Sachs ex-chairman was responsible for managing bond sales for the Malaysian fund. According to the report of Bloomberg, authorities have subpoenaed Mr. Leissner in relation to the corruption issue of 1Malaysia Development Berhad. A Swiss bank BSI SA, whose Singapore division dealt with 1Malaysia Development Berhad accounts, is currently being investigated as well. The Singapore central bank and Monetary Authority of Singapore, have also requested financial companies to provide information regarding their transactions with 1Malaysia Development Berhad.

As of 10:53 AM GMT -4 on April 4, the JPMorgan stock is changing hands at $59.17, down by 0.44 percent or 0.26. Meanwhile, the DBK stock is trading at 14.88 euros, lower by 0.20 percent or 0.03.

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