Goldman Sachs and Malaysia have signed an agreement finalizing the US bank's $3.9 billion settlement over the 1MDB scandal, allowing for its implementation.

A view of a sign for Goldman Sachs at the New York Stock Exchange in November 2018 Photo: IC

Both parties announced the settlement in July, but the formal signing of the agreement - disclosed by Goldman in a regulatory filing in New York on Tuesday - completes the process. Billions of dollars were looted from sovereign wealth fund 1Malaysia Development Berhad in a fraud that involved former prime minister Najib Razak and his cronies. 

The cash plundered from state coffers bankrolled a global spending spree, and was spent on everything from artwork, to real estate and a superyacht.

Goldman's role came under scrutiny over bond issues totaling $6.5 billion it helped arrange for the investment vehicle, with Malaysia claiming large amounts were misappropriated during the process.

In its New York filing, the Wall Street titan said the signing of the settlement pact "implements the prior agreement in principle" announced on July 24. The settlement comprises a cash payment of $2.5 billion to Malaysia and a guarantee that at least $1.4 billion in assets acquired with misappropriated funds would be recovered. 

Bloomberg News reported that Goldman must make the cash payment to Malaysia within 10 days, citing sources.

Under the agreement, Malaysia will end all criminal proceedings against the bank. 

Prime Minister Muhyiddin Yassin said in July that, combined with 1MDB-linked funds already returned by the US, the country will receive a total of $4.5 billion.