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1Malaysia Development Berhad and the use of bearer share entities and artwork to facilitate money laundering


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Conor McStay

Senior Associate 

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Tuesday 16 June 2020

With the second season of the Netflix docu-series Dirty Money and the release of revised editions of Billion Dollar Whale by Tom Wright and Bradley Hope, the 1Malaysia Development Berhad (1MDB) scandal is moving to sources more accessible to the general public. This sits alongside ongoing developments from the US Department of Justice to repatriate further funds to the Government of Malaysia in relation to the 1MDB scandal.[i] As a result of this, it is possible to retrospectively review the 1MDB scandal and not only identify some of the methods employed by the protagonists (primarily Jho Low) to successfully launder up to $4.5 billion from 2009 to 2015, but how these methods were combined and utilised in tandem to increase the effectiveness of their scheme. This article will discuss the role played by bearer share companies in facilitating Low’s actions as well as reviewing purchases made in the art industry with laundered money as part of the 1MDB scandal.


Bearer share companies

A bearer share is an equity security wholly owned by whoever holds the physical stock certificate. The issuing firm neither registers the owner of the stock nor tracks transfers of ownership. Understandably, the risk here is that the physical ownership of this stock can change on a whim and is rarely tracked. Therefore, identifying company ownership may become an impossible task. As a result, bearer share issuance has been abolished in most jurisdictions, or has only been prohibited in certain countries relatively recently. For example, Seychelles had not introduced legislation prohibiting bearer share issuance until 2013.[ii]

Armed with this information, a number of entities were incorporated in Seychelles by Jho Low or his associates prior to 2013, with the aim of being able to control and mask the beneficial ownership of these companies through bearer shares. This included Good Star Limited and Smart Power.[iii] Good Star Limited was the company used by Low to siphon $700 million worth of funds from a 1MDB investment in a joint venture with PetroSaudi International Limited. The sole corporate director, and therefore the entity with control over Good Star Limited, was “Smart Power”. Both Good Star Limited and Smart Power were wholly owned by Jho Low via bearer shares.[iv] This process of using bearer share companies under the control of Low and associates was repeated several times during the 1MDB scandal.

Having control over bearer share entities would only be useful if they could convince financial institutions with weak systems or controls to transfer funds into them without questioning the ownership or controllers behind them. As a result, a number of the bearer share entities used to launder money and route payments were given names which bore a close resemblance to other legitimate entities and organisations (or at least it could be inferred as such). For example, we see this when reviewing the ownership structure of Abu Dhabi Kuwait Malaysia Investment Corp., (a British Virgin Islands incorporated entity which was used to transfer funds from 2007 to 2010), we see the following companies:

  • ADIA Investment Corp — 21%

  • KIA Investment Corp — 21%

  • Abu Dhabi-Malaysia (Business Development) Investments Corp (ADMBD) — 10%[v]

A cursory internet search for the terms “ADIA” and “KIA” returns results for the Abu Dhabi Investment Authority and the Kuwait Investment Authority respectively. All three of the above companies make for logical shareholders in a company which, on the surface, appears to be used as a joint venture by the governments of Abu Dhabi and Kuwait for the purpose of investing in Malaysia. Therefore, this may not have raised red flags at the financial institutions responsible for processing payments involving any of the above companies, especially because the financial institutions involved in the 1MDB scandal were often located in jurisdictions with a weaker regulatory framework.

What is important to note is that ADIA Investment Corp and KIA Investment Corp are Seychelles incorporated bearer share entities and that ADMBD is a British Virgin Islands incorporated bearer share entity. Ownership of ADIA Investment Corp and KIA Investment Corp was never confirmed, but they are believed to belong to Jho Low or his associates rather than the governments of Abu Dhabi or Kuwait (after all, why would a Government establish companies where control can be transferred via bearer shares?). As for ADMBD, it was another bearer share entity which was effectively 70% controlled by associates of Jho Low (individuals who held similar board roles at other bearer share companies at the same time as Low).[vi]


Art purchasing

The trading of art is considered a higher risk nature of business as the sector isn’t subjected to a stringent regulatory framework, such as consistent source of wealth checks or benchmarking the value of the end products. As such, the art industry is considered to be vulnerable to money-launderers looking to integrate their wealth into the mainstream banking system and to give their wealth a sense of legitimacy.[vii] The Organised Crime and Corruption Reporting Project’s (OCCRP) coverage of the Panama Papers has highlighted how art dealers may seek to avoid paying taxes on the sale of their assets and use secrecy jurisdictions to disguise the ownership and transfer of their art portfolio.[viii]

Some of Low’s more public purchases related to artwork, and these purchases also served as a tool to increase his legitimacy in wider social circles and acted as a method of buying favour with other people. This included the alleged purchase of Women of Algiers (Version O) by Pablo Picasso for $179 million,[ix] as well as the purchases made in the name of Eric Tan (an affiliate of Low) of a separate Picasso (as well as a Basquiat painting) for the combined price of $12.5 million. These paintings subsequently had their ownership transferred to the actor Leonardo Di Caprio in December 2013, in a move to keep the actor open to the possibility of appearing in further films financed by Low (art works were disgorged by Di Caprio in 2017).[x] The reference to “further” films is in relation to the fact that The Wolf of Wall Street was produced by Red Granite Pictures, a company co-founded by the son of the Prime Minister of Malaysia and partially funded by Low.[xi] The full list of purchases attributed to Low or his affiliates shows a number of pieces purchased, as well as (crucially) reticence on art dealers’ behalf to apply any scrutiny to the deals, instead viewing this as a chance to take money from another member of the nouveau riche.[xii] 

As documented in Billion Dollar Whale, Low used bearer share companies owned by himself or affiliates for his property purchases. However, he used a separate tactic to ensure his anonymity and secrecy was maintained with his art purchases: his works were stored at the Geneva Freeport, after having been made aware of its existence by a co-conspirator.[xiii] Freeports are warehouses in free zones (often secrecy jurisdictions) that were originally intended as spaces to store merchandise in transit without any taxes being applied. They have since become popular for the storage of valuables often on a permanent basis. As noted in a report by The European Parliament, Freeports are being more frequently used since interest in purchasing art as an investment has grown, and it would naturally be more appealing to store it tax free while it potentially appreciates in value. In addition, Freeports do not require external ratification of the value of property stored there, or declarations relating to the beneficial owners.[xiv] All these factors appealed to Low’s need for secrecy throughout this process.

Finally, another benefit to owning such an art collection was the role it could play as an easy source of funds for Low if required, and its purpose as a divestment device for Low was seen in 2016 when a number of paintings were sold in a situation akin to a “fire sale” - with a loss of $14 million on one painting alone.[xv] As is the case with money laundering, any losses incurred at the traditional placement and layering stages are “a means to an end” if they result in the individual seemingly having legitimate money at the end of the integration stage.

Ultimately, whilst Low was able to benefit from a number of weak regulatory and AML controls at a number of financial institutions and the ongoing existence of secrecy jurisdictions, he was able to combine these alongside his own initiative and experience to maintain an increasingly complex web of secrecy, aimed at disguising the illicit transfer of funds from the Malaysian people. There are a number of measures being introduced to address these issues, for example, the 5th EU Money Laundering Directive now requires art dealers to disclose the identity of any individuals making a purchase in excess of €10,000.[xvi] However, it is evident that there were issues, including human error at financial institutions in applying due diligence, that are harder to address with legislation and therefore serve as a reminder of the vulnerability of institutions to facilitating money laundering and the importance of having robust due diligence policies with robust internal checks.


[i] United States Department of Justice. U.S. Repatriates $300 Million to Malaysia in Proceeds of Funds Misappropriated from 1Malaysia Development Berhad (2020) [online]. Available at: . United States Department of Justice. United States Reaches Settlement to Recover More Than $49 Million Involving Malaysian Sovereign Wealth Fund (2020) [online]. Available at:

[ii] Consulate of Seychelles. Company Laws - Bearer Shares [online]. Available at: . Global Forum on Transparency and Exchange of Information for Tax Purposes. Supplementary Peer Review Report: Phase 2 Implementation of the Standard in Practice - Seychelles (2015) [online]. Available at:

[iii] United States Department of Justice. United States of America, Plaintiff, v. Certain Rights to and Interests in the Viceroy Hotel Group (2017) [online]. Available at:

[iv] Sarawak Report. Najib Moves From Cover Up To Shut Up! (2016) [online]. Available at:

[v] The Edge Markets. Investigative Report on 1MDB: Jho Low Uses Bearer Share Firms and Those with Sovereign Names to Mislead (2017) [online]. Available at:

[vi] The Edge Markets. Investigative Report on 1MDB

[vii] ACAMS Today. Art and Antiquities: Conduits for Money Laundering and Terrorist Financing (2018) [online]. Available at:

[viii] Organised Crime and Corruption Reporting Project. The Art of Secrecy (2016) [online]. Available at:

[ix] The Guardian. Picasso painting breaks record for most expensive artwork sold at auction (2015) [online]. Available at:

[x] Tom Wright and Bradley Hope. Billion Dollar Whale (2019), pg 253.  Art Market Monitor. DiCaprio Returns Basquiat & Picasso Gifts from Jho Low as US Seeks 1MDB Assets (2017) [online]. Available at:

[xi] BBC News. Wolf of Wall Street producer arrested in Malaysia for money laundering (2019) [online]. Available at: . Billion Dollar Whale, pg 131.

[xii] Artsy. How the World’s Biggest Financial Scandal Ensnared the Art World (2019) [online]. Available at: . Billion Dollar Whale, pg.233

[xiii] Billion Dollar Whale, pgs.231-232.

[xiv] European Parliament. Money Laundering and Tax Evasion Risks in Free Ports (2018) [online]. Available at:

[xv] Billion Dollar Whale, pg.345.

[xvi] Mishcon de Reya. The Big Picture: Anti-Money Laundering and the 5th Directive (2018) [online]. Available at:  .

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