1. What were the “Predication of fraud” of the 1MDB fraud case?

What is meant by the predication of fraud? The word predication refers to the
circumstances, taken as a whole that would lead a reasonable prudent professional to
believe that a fraud is occurring, or will occur. The examples of predication for example like
anonymous tip by someone who sense the possibility of fraud or missing or irrational
accounting transaction or record detected in the book of company. The exposure of
predication will eventually leads to fraud investigation. Investigation is done by the
identification of who, how, when, where, why and what elements of the fraud which is
possibly occurring or will occur.

In the case of 1MDB, there are several predication that urge the responsible party to
initiate fraud investigation onto the case. The first most subtle indication is that financial
analysts pointed out that the fund was not generating enough cash to cover interest
payments on the billions of dollars of debt it had acquired. This arise the issue that where do
the money gone to? The case become worse when the debt of 1MDB swells up to $11bn. In
fact, the Prime Minister, who believed responsible for the case appeared unconcerned,
telling the state news agency that the government was not liable for the debt if the fund
went bankrupt.

Besides, the sole power to direct 1MDB action owned by Prime Minister Najib also could
be considered as predication to the fraud. He has the sole power to approve investments
and to hire and fire board members and manager. We need to understand that 1MDB
incorporated by government and its operation is for the public’s good, and suppose, the
power of management should not be govern by one person but instead a group of person.
Individual dominant governance of a board of company, in our opinion will usually end up
with undesired outcome due to self-interest and greed.

Another predication would be the suspicious transaction between 1MDB and PetroSaudi
which revealed by Clare Rewcastle Brown. Thousands of emails is purchased by Clare
Rewcastle Brown from the whistle blower, Xavier Justo expose the suspicious transaction to
public, especially that related to Good Star. Justo had handed the British journalist
thousands of documents, including 227,000 emails, from the servers of his former employer,
PetroSaudi, which appeared to shed light on the alleged theft of hundreds of millions of
dollars from a state-owned Malaysian investment fund known as 1MDB.
2. Suggest and explain possible investigation method that would be suitable to
investigate the above case.

There are some method that are available for the investigation of the issue. The first
method would be using the evidence square, where this method is mainly focus on the
appropriate and types of evidence that would helps in investigate the case. These would
include Testimonial evidence, documentary evidence, physical evidence, and personal
observation. Testimonial evidence is those evidence gathered from individual through
interrogation, test, interview etc; Documentary evidence are those evidence gathered from
computers, and other written resources like emails, databases etc; Physical evidence which
may include fingerprints, tire marks, and other tangible evidence; and personal observation
which include physical evidence that is sensed(see, hear, touched, etc.).

Besides, the investigator could also utilize the fraud motivation triangle and fraud
element to investigate the case. The fraud motivation factor are opportunity, pressure, and
rationalization; the fraud element include theft act, conversion, and concealment. Each of
the criteria inside each triangle provide us the direction of investigation in each of the case
identified.

By utilizing the fraud motivation triangle, we could investigate the case through the
analysis in these three criteria:

Opportunity

The fraud investigator can look into what creates the opportunity for the fraudster to
commit fraud. As we can see in this case, our Prime Minister is responsible for the fraud due
to is authority given to him to govern 1MDB. Besides, the low transparency for Good Star,
which incorporated in Swiss also creates such opportunity for the fraud to occur.

Pressure

The pressure could come range from financial pressure, vice, work-related pressure and
other pressures that force one to commit fraud. In this case, the investigator could go
deeper to identify the possible pressure that cause all personnel who related to the fraud
commit the act, who range from Najib Tun Razak, Mahony, Riza Aziz, Tarek Obaid etc.

Rationalization

The rationalization is the most reason why a fraudster commit fraud. In the case given,
in my opinion, the rationalization could be the statement that is mentioned by Najib Tun
Razak himself to the state agency, where the government was not liable for the debt if the
fund went bankrupt. Perhaps due to the separation of ownership and management cause
him to come out with such statement. This statement seems like he is denying his fiduciary
duty on the governance of 1MDB as 1MDB is owned by government, and he is the one who
control the direction of government.

Next, we will further look into the case through fraud element triangle, by analyse the
case in terms of below criteria:
 Theft Act

This includes surveillance, and convert operation, invigilation, seizing and searching
computers and physical evidence. In this case, emails and other related electronic device
which contain the information need to be seized from the investigated personnel. For
example in this case, all bank accounts that is related to the fraud is being freeze for
investigation and prevent any out flow of cash.

Conversion method

This includes searching public records, online resources, and net worth method. Perhaps
in this case, the investigator could utilize the net worth method to analyze the unknown
source of income for the person who suspect for the fraud. For example, the law
enforcement officials in US who had been alerted to reports that Low was spending huge
amounts on New York apartments could perform such method to identify the unknown
source of income, and searching public record like article from Sarawak report which had
give the idea where are the possible source of Low’s wealth.

Concealment method

This includes document examination, audits, electronic search and physical asset count.
For example, in the case given, the emails that reveal the fraud, owned by Clare Rewcastle
Brown, is being further analyzed to detect the fraud.

3. “Fraud investigation is very sensitive and must be undertaken with extreme care”.
Discuss the statement in relation to 1MDB case.

The statement of “Fraud investigation is very sensitive and must be undertaken with
extreme care” itself wanted remind us that the investigation will always influenced and altered
by the person who is investigated and all other parties who either directly or indirectly involve in
the case. We should always concerned and predict the reaction of the fraudster and the others
react to the investigation. It is important not to alert potential perpetrators about the
investigation, or they can hide and destroy the evidence. In some cases, when perpetrators
become aware of that they are the target for the fraud investigation, these perpetrators will
ended up suicide for the reason of inability to withstand the trauma of being caught for the
fraud.

Referring to the case, we can see that there is an attempt by Mahony, one of the director of
PetroSaudi to alter and destroy the information related to the fraud that is exposed to the
relevant parties who concern about the case. Through the article, we understand that Justo as
whistle blower sell the documents of the PetroSaudi-1MDB to Rewcastle Brown by $2m. It was,
he said, the money he should have been paid when he left PetroSaudi. Both are scare since they
are dealing with ruthless and powerful people who have huge amount of money. “They could do
what they liked to us”, said by Justo. Months after that, Justo is being jailed due to allegation by
Mahony that Justo was attempt to threaten his previous employer, who denied by Justo himself.

A deal was offered by Mahony to Justo that if Justo confess, Mahony will try to get him out
of the jail by the end of year. However, months after that Laura, Justo wife came to believe that
Justo was a victim of a deceit by his former friends, who tricked him into confessing and handing
over copies of PetroSaudi’s servers, in an attempt to protect themselves and their Malaysian
associates by burying the case.

Let’s us change our scope to Malaysia and see how to relates it to the statement above. Our
Prime Minister, Najib Tun Razak tightened his grip on power as the issue of 1MDB arise. He
direct the government pushed through harsh penalties and restrictions on free speech,
particularly on social media. Five executives of Tong’s The Edge Media Group who involved in
publishing details of the PetroSaudi deal were arrested for sedition. Previous attorney general
was summarily dismissed by a civil servant for the reason, as Najib said in public media, the
country’s top legal officer was too ill to continue in the role. The attorney general had attempt
to file to charge on Najib for the case before he is dismissed. The next day, a mysterious fire
swept through police headquarters, where records of white-collar crimes were kept. Some
speculate that the fire is attempt to destroy important document related to the case. (Zolkepli,
2015) Up until last year, the new attorney general Mohamad Apandi Ali said that there is
currently no evidence that money had been misappropriated from 1MDB (Malaysiakini, 2016).

Above paragraphs describe how these “suspects” react when they know they are going to
be investigated. No matter who is wrong in this case, the victim, in this case which is the public
need to bear the loss due to the misappropriation of asset. The worst case will be we might end
up to punish the wrong person for the fraud case identified, especially if the case is being
handled inappropriately. The innocents’ reputation will be irreparably injured, the fraudster will
be considered free from guilt and victim cannot claim for the compensation for the harms that
the fraudster caused.

“For now, the man whose revelations enabled the exposure of this vast fraud remains in a
Bangkok prison. Xavier Justo is the whistle blower, motivated by a mixture of morality and
revenge. The desire to settle scores with a friend who betrayed him. To get even, he chose to
blow the whistle, for a price. He may not go down in history as a hero who selflessly risked ruin
to expose the truth. But in doing so, he did unwittingly sacrifice himself.” It is truly hard to be a
hero sometimes in reality. But when you did it, there’s always sacrifices comes after that.