Regulators Fine Goldman Sachs for Risk Management Failures
FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB). The FCA and PRA fines are part of a USD 2.9 billion globally coordinated resolution reached with The Goldman Sachs Group Inc. and its subsidiaries. 1MDB is a Malaysian state-owned development company that has been at the center of billion-dollar embezzlement allegations. Goldman Sachs International underwrote, purchased, and arranged three bond transactions for 1MDB in 2012 and 2013 that raised a total of USD 6.5 billion for 1MDB. The 1MDB transactions were approved by global The Goldman Sachs Group Inc. committees that Goldman Sachs International participated in and were booked to Goldman Sachs International.
FCA and PRA have fined Goldman Sachs International a total of GBP 96.6 million (USD 126 million) for risk management failures connected to 1MDB and its role in three fund raising transactions for 1MDB. The investigation found that Goldman Sachs International breached a number of FCA and PRA principles and rules. Specifically, GSI failed to:
- Assess with due skill, care, and diligence the risk factors that arose in each of the 1MDB bond transactions on a sufficiently holistic basis
- Assess and manage the risk of the involvement in the 1MDB bond transactions of a third party that Goldman Sachs International had serious concerns about
- Exercise due skill, care, and diligence when managing allegations of bribery and misconduct in connection with 1MDB and the third 1MDB bond transaction
- Record in sufficient detail the assessment and management of risk associated with the 1MDB bond transactions
The USD 2.9 billion global resolution announced included, in addition to the FCA and PRA, the US Department of Justice, the US SEC, the FED, the New York Department of Financial Services, MAS, the Attorney-General’s Chambers Office, Singapore, and the Commercial Affairs Department of the Singapore Police Force. The global resolution is separate from the USD 3.9 billion settlement reached between The Goldman Sachs Group Inc. and the Government of Malaysia in August 2020. FED announced that it has fined the Goldman Sachs Group, Inc. USD 154 million for the firm's failure to maintain appropriate oversight, internal controls, and risk management with respect to Goldman's involvement in a far-reaching scheme to defraud a Malaysian state-owned investment and development company, 1Malaysia Development Berhad (1MDB).
Additionally, in Singapore, a conditional warning was issued to Goldman Sachs Singapore Pte, which has committed to, among other things, paying USD 122 million to the Singapore Government’s Consolidated Fund within 5 working days from the date of the Conditional Warning. MAS has directed Goldman Sachs Singapore Pte to appoint an independent external party to review the measures taken by Goldman Sachs Singapore Pte to remediate deficiencies uncovered during an inspection conducted by MAS in 2016 on the company’s risk governance and controls in relation to the 1MDB bond offerings. MAS found lapses in the company's management oversight of enterprise-wide risk, inadequate documentation of risk assessments performed for the 1MDB bond offerings, and poor corrective actions taken for staff’s non-compliance with its policies and processes.
Related Links
Keywords: International, Europe, Americas, Asia Pacific, UK, US, Singapore, Banking, Goldman Sachs, Compliance Breach, FCA, PRA, FED, MAS
Previous Article
ISDA Launches IBOR Fallbacks Supplement and ProtocolRelated Articles
EC Regulation Sets Out Standards for Reporting and Disclosure of MREL
EC published the Implementing Regulation 2021/763 that lays down implementing technical standards for supervisory reporting and public disclosure of the minimum requirement for own funds and eligible liabilities (MREL).
EBA Report Notes Loan Origination Should Remain in Supervisory Focus
EBA published a report that examines the convergence of prudential supervisory practices in 2020 and offers conclusions of the EBA college monitoring activity.
APRA Decides to Standardize Submission Date for Quarterly Reporting
APRA announced the standardization of quarterly reporting due dates for authorized deposit-taking institutions.
ECB Working Group Publishes Recommendations on EURIBOR Fallbacks
The private sector working group of ECB on euro risk-free rates published the recommendations to address events that would trigger fallbacks in the Euro Interbank Offered Rate (EURIBOR)-related contracts, along with the €STR-based EURIBOR fallback rates (rates that could be used if a fallback is triggered).
Bundesbank Publishes Supporting Documentation for Reporting by Banks
Bundesbank published a list of "EntryPoints" that are accepted in its reporting system; the list provides taxonomy version and name of the module against each EntryPoint.
EBA Publishes Phase 1 of Reporting Framework 3.1
EBA published the phase 1 of its reporting framework 3.1, with the technical package covering the new reporting requirements for investment firms (under the implementing technical standards on investment firms reporting).
IOSCO Sees Support for Mandatory Sustainability Reporting
The Sustainable Finance Taskforce of IOSCO held two roundtables, with global stakeholders, on the IOSCO priorities to enhance the reliability, comparability, and consistency of sustainability-related disclosures and to collect views on the practical implementation of a global system architecture for these disclosures.
APRA to Finalize Capital Adequacy Standard Revisions by January 2022
Asia Pacific Australia Banking APS 111 Capital Adequacy Regulatory Capital Basel RBNZ APRA
ESMA Issues Guidelines on Outsourcing to Cloud Service Providers
ESMA published the final guidelines on outsourcing to cloud service providers.
EBA Publishes Data on Deposit Guarantee Schemes
EBA published annual data for two key concepts and indicators in the Deposit Guarantee Schemes (DGS) Directive—available financial means and covered deposits.
