Simon Fawell comments on the 1MDB scandal and the wider implications for financial institutions in Professional Wealth Management

The fallout from the 1MDB scandal continues to affect the private banking sector more than a decade after the Malaysian state investment fund became embroiled in one of the world's largest corruption cases. With governments continuing efforts to trace and recover misappropriated assets, financial institutions are still facing scrutiny over their alleged involvement. In September 2026, Singapore-based DBS became the latest bank to face legal proceedings linked to the scandal.

Simon Fawell, Partner at Signature Litigation, commented: 

"The 1MDB scandal has given the banks involved a major reputational hit but there has also been a huge impact across the sector as a whole given how many financial institutions have become embroiled in the allegations and because the failings have largely been found to be institutional rather than the banks being able to pass it off as one or two bad actors within huge organisations. The scandal has fed into a more general narrative (in many cases undeserved) that the banks were prepared to take a light touch on their anti-fraud and AML obligations provided the fees were good"

"1MDB, together with a number of other incidents has absolutely led to increased scrutiny on the anti-fraud and AML processes within the banks and the internal checks and balances in place. There has also been an impression though that, even where the banks have relatively effective fraud monitoring processes in place, the information collected doesn't necessarily get used to prevent their customers from being defrauded. This scrutiny has led to tighter regulation but is also part of the reason behind the spike in so-called 'Quincecare' claims where (usually) a company's liquidators assert that a bank should have spotted that the company was being defrauded by those in authority at the time and stopped the fraudulent payments being made."

"Lessons have certainly been learnt. There have been a number of regulatory investigations in the wake of 1MDB which have led to a tightening of the rules around AML and anti-fraud compliance as well as a general improvement with regard to transaction monitoring and oversight of the AML function. There remains a difficult balance to be struck, though, between ensuring checks and balances are in place to help prevent fraud and the need for the banking system to operate smoothly and allow payments to be made quickly in accordance with customer instructions."