1MDB Adviser to succeed Zeti as Bank Negara governor

KUALA LUMPUR - A top government official on the board of advisers of a controversial state investment fund is set to become the new head of the central bank, which had recommended investigating the fund, two people familiar with the matter said.

The move comes over the objection of the current central-bank governor, Zeti Akhtar Aziz, who is retiring next month after 16 years in the post and recommended a deputy governor to succeed her, one of the people said.

The finance ministry’s top bureaucrat, Irwan Serigar Abdullah, is expected to be named as the new central-bank head by the government in the coming week, a cabinet minister and a senior commercial banker said Friday.

Investigators in at least five countries, including the U.S., are probing allegations that billions of dollars in money from the state fund, 1Malaysia Development Bhd., or 1MDB, has gone missing.

Malaysia’s central bank, known as Bank Negara Malaysia, under Zeti has been among the most aggressive agencies investigating the allegations against 1MDB. The fund is wholly owned by the finance ministry, led by Prime Minister Najib Razak.

Mr. Najib is chairman of 1MDB’s board of advisers that oversees the fund. Mr. Irwan, as a senior ministry official, is a member of that board.

The central bank recommended that the attorney general’s office file criminal charges against 1MDB for allegedly giving inaccurate information regarding the investment of $1.83 billion outside the country from 2009 to 2011. The attorney general declined, saying Bank Negara had supplied insufficient evidence.

The Wall Street Journal has reported how investigators in two countries believe that more than $1 billion entered Najib’s personal bank accounts, much of it originating with 1MDB. The prime minister has denied taking money for personal gain. The fund said it has never transferred money to the prime minister’s accounts and has said it is cooperating with the probes.

The central bank appointment requires formal confirmation by Malaysia’s king, which is expected.

The office of Razak, Bank Negara and Mr. Irwan didn’t respond to requests to comment. Attempts to reach Zeti were unsuccessful.

Irwan, who holds a master’s in energy management and policy from the University of Pennsylvania, has been a government official since 1984 and joined the finance ministry in 2003. He is also a member of the central bank’s board.

During Zeti’s time as governor, stable economic management attracted investment in the nation’s stock and bond markets. This year, however, the ringgit, Malaysia’s currency, has been under pressure partly because of lower prices for the country’s commodity exports. Investor confidence also has been hurt by the 1MDB scandal.

In January, Malaysia’s attorney general cleared the prime minister of any wrongdoing, saying that $681 million of the money that entered one of Najib’s accounts was a legal donation from Saudi Arabia’s royal family and most of it was returned to them.

Some investigators, however, believe the money originated with 1MDB and passed through a web of intermediaries to Najib’s accounts, before much of it was returned.