How did 1MDB fail to distinguish between real and fake Aabar firms?

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1MDB's Failure to Distinguish Between Real and Fake Aabar Entities

1MDB failed to distinguish between the genuine Aabar Investments PJS and a fraudulent entity, Aabar Investments PJS Limited, primarily due to striking similarities in their names, shared addresses, and representation by the same key individuals. This lack of differentiation allowed for hundreds of millions of US dollars from 1MDB subsidiaries to be transferred to the fake Aabar.
Identical Company Details and Representation

The former chief financial officer of 1MDB, Azmi Tahir, testified that both the real and the fake Aabar entities shared the same company address. Furthermore, both were represented by the same individual, Mohamed Badawy Al-Husseiny, who was the CEO of the genuine Aabar. This dual representation and identical address created a significant obfuscation, making it difficult to discern the legitimate entity from the imposter. Azmi stated that even the 1MDB board and management did not notice the difference between the two Aabar companies at the time of the transactions, largely due to these shared details.
Convoluted Transaction Structures

The complexity of the transactions further contributed to the inability to distinguish between the two Aabar firms. For instance, in May 2012, 1MDB subsidiary 1MDB Energy Limited (1MEL) entered into two separate agreements. One was with the real Aabar Investments PJS for an option to buy shares, and another was with the fake Aabar Investments PJS Limited for a collateral deposit related to a bond guarantee. On the same day that bond funds arrived in 1MEL's account, nearly US$577 million was transferred to the fake Aabar's account. A similar pattern occurred in October 2012 with 1MDB Energy (Langat) Limited (1MELL), which also signed agreements with both the real and fake Aabar, resulting in a collateral deposit paid to the fake entity.
Lack of Scrutiny and Auditor Queries

Azmi Tahir indicated that he, along with the 1MDB board and management, were unaware of the involvement of two distinct Aabar entities in the October 2012 agreements because identical details were provided for both companies. It was not until 2015, when the National Audit Department began its audit on 1MDB, that questions were raised about Aabar. Azmi was shown an incumbency document by Terence Geh that confirmed Aabar Investments PJS Limited was owned by IPIC, which he then provided to the National Audit Department. Azmi also later learned in 2015 that Al-Husseiny, through Aabar, was a director of Falcon Bank.
Significant Fund Transfers to Fake Entity

The financial dealings extended to further transfers to the fake Aabar. In 2014, 1MDB Energy Holdings Limited transferred US$175 million to the British Virgin Islands entity Aabar Investments PJS Limited's account. Subsequently, from two separate loans totalling US$1.225 billion, further payments of US$223.333 million and US$457,984,607 were sent to the Seychelles-incorporated Aabar Investments PJS Limited's account. Azmi stated he did not know why only a portion of the first loan was disbursed to the fake Aabar and reiterated his lack of awareness regarding the distinction between Aabar Investments PJS and Aabar Investments PJS Limited.

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How did 1MDB fail to distinguish between real and fake Aabar firms?

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