KUALA LUMPUR (Dec 11): The High Court here has granted Malaysian prosecutors a 'freeze order' barring PetroSaudi International Ltd (PSI) chief executive officer Tarek Obaid and others from accessing US$340 million allegedly linked to 1Malaysia Development Bhd (1MDB).

Judge Datuk Ahmad Shahrir Mohd Salleh granted the prohibition order, which prosecutors filed in 2020, as he was satisfied that sufficient evidence had been adduced to show that the monies in question were linked to money-laundering activities.

"So long as evidence is produced to demonstrate the satisfaction of any one of the categories, it is mandatory for this court to make the order prohibiting the person but by whom the property is held, or with whom it is deposited, from dealing with it," the judge said in his brief decision on Wednesday.

The categories he was referring to are in relation to Section 53 of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act (AMLA).

The Section states that the public prosecutor may make a prohibition application barring parties from dealing with property held outside Malaysia if he is satisfied that any of the property is: a) the subject matter or evidence relating to the commission of an offence under Subsection 4(1) or a terrorism financing offence; b) terrorist property; c) proceeds of an unlawful activity; or d) the instrumentalities of an offence.

The government is seeking a total of US$340 million (as of February 2019) held in the client's account at Clyde & Co LLP on behalf of PetroSaudi Oil Services (Venezuela) Ltd.

In addition, the prosecution is also seeking unspecified sums that were deposited under an intermediate account name of Temple Fiduciary at Barclays Bank in the UK.

The prosecution has contended that the funds in the escrow account could be traced back to 1MDB.

However, the respondents have contended that the funds were "clean monies" — the result of an arbitration award where Venezuela's state-owned entity Petroleos de Venezuela SA (PDVSA) was ordered to pay PetroSaudi Oil Services (Venezuela) for services rendered in relation to an oil exploration contract.

They have also pointed out that both parties had been engaged in an arbitration proceeding in relation to sums under a drilling contract, and PDVSA was ordered to deposit US$500 million in an escrow account with Clyde & Co LLP pending the final award.

Besides Tarek, the other respondents in the application are PSI, PetroSaudi Oil Services (Venezuela), UK based-law firm Clyde & Co LLP and Temple Fiduciary Services Ltd.

PetroSaudi Oil Services (Venezuela) is a subsidiary of PetroSaudi Oil Services Ltd (PSOSL). PSOSL in turn is a unit of PSI, co-founded by Tarek.

Deputy public prosecutor Norinna Bahadun is representing the prosecution, while Tarek is represented by former solicitor general II Datuk Mohd Yusof Zainal Abiden, while Alex Tan is acting for PSI, PetroSaudi Oil Services (Venezuela) and Temple Fiduciary. Clyde & Co is not represented.

In September 2020, the US Department of Justice (DOJ) filed a forfeiture application to seek US$300 million in additional assets allegedly associated with the multibillion-dollar 1MDB scandal, which it had traced to the escrow account in the UK.

The DOJ claimed that the funds in the account are traceable to a line of credit extended by PDVSA to PSOSL, in relation to the use of two drill ships that PSI acquired with fraudulent funds obtained from 1MDB.

It was reported that PSI is contesting the DOJ's forfeiture claim.