The UK Financial Conduct Authority (FCA) and the Prudential Authority (PRA) regulator of all depository corporations of banks, credit unions, insurers and investment funds. Works at the Bank of England Authority were fined Goldman Sachs International (GSI), a subsidiary of Goldman Sachs Group Inc., for £ 96.6 million, equivalent to $ 126 million, for risk management failures associated with 1Malaysia Development Berhad (1MDB).

Goldman Sachs International (GSI) is an investment banking, securities and investment management company headquartered in London and authorized and regulated by the FCA and PRA. GSI is an indirect wholly owned subsidiary of Goldman Sachs Group, Inc. GSI acts as a reservations organization for bond transactions signed and acquired by Goldman Sachs outside the United States.

1MDB is a Malaysian state-owned development company established to implement investment and development projects for the benefit of Malaysia and its people. According to US court documents, when 1MDB raised money to fund its projects between 2009 and 2014, billions of dollars were misappropriated and fraudulently diverted from 1MDB.

1MDB is a Malaysian state-owned growth company that has been at the center of billion dollar embezzlement charges. GSI acted as guarantor, bought and arranged three bond deals for 1MDB in 2012 and 2013. As a result, a total of US $ 6.5 billion was raised on 1MDB. 1MDB transactions were approved by GSG global committees in which GSI participated.

Clients and counterparties in jurisdictions with an increased risk of financial crime participated in 1MDB transactions. GSI was also aware of the risk of third party involvement.

GSI was unable to assess the risk management situation on time in accordance with the standard required, taking into account the risk of 1MDB transactions, and GSI did not review the bribery allegations in 2013 and did not consider allegations of misconduct in connection with 1MDB in 2015.

FCA and PRA fines are part of a USD 2.9 billion global consensus solution levied from Goldman Sachs Group Inc. (GSG) and its subsidiaries.

Mark Steward, FCA Executive Director of Compliance and Market Surveillance, said:

"Firms play a critical role in fighting financial crime and maintaining the integrity of the financial system. GSI's failure to take appropriate action in this case indicates that the company did not take full responsibility. Faced with allegations of bribery and personnel misconduct, the firm's mistreatment has allowed serious misconduct to be ignored. There is no amnesty for firms that are poor at dealing with financial crime and the size of the GSI fine reflects that. "

Sam Woods, Deputy Prudential Governor and Chief Executive Officer of PRA, said:

"Failure to manage the risk of financial crime can have a significant negative impact on the safety and sustainability of a company. We hoped that firms would manage risk, including financial crime with prudence and integrity and take allegations of bribery and misconduct very seriously. The seriousness of the case and GSI's failures in connection with 1MDB is reflected in the PRA fine."

Announced on October 22, 2020, the US $ 2.9 billion global resolution includes, in addition to the FCA and PRA: US Department of Justice, US Securities and Exchange Commission, US Federal Reserve Board of Governors, New York City Department of Financial Services, Monetary Authority-Credit Regulation of Singapore, the Attorney General of Singapore and the Commercial Affairs Department of the Singapore Police.

GSI attempted to resolve this issue with the FCA and PRA, asking for a 30% discount on the total penalty imposed by the two regulators. Without this discount, the FCA and PRA would have fined GSI £ 69,012,000 (US $ 90,000,000) each.