Malaysia launches inquiry over forex losses under Mahathir

Malaysia's government on Tuesday launched an inquiry into massive foreign exchange losses by the central bank more than two decades ago, in a probe that could lead to criminal prosecution for former Prime Minister Mahathir Mohamad.

Opposition leaders slammed the inquiry as a political ploy to discredit Mahathir just months after he set up a new political party. He now leads an opposition coalition aimed at ousting Prime Minister Najib Razak in general elections due in mid-2018.

Mahathir, 92, led the country for 22 years before stepping down in 2003. He has been spearheading calls for Najib to resign over a multibillion-dollar financial scandal in indebted state fund 1MDB. The fund is being investigated in several countries for money laundering. Najib has denied any wrongdoing.

A five-member Royal Commission of Inquiry, meeting for the first time Tuesday, said it will investigate how much the central bank lost in currency trading in the 1990s and determine if there was a cover-up.

The inquiry was set up after the government said a preliminary investigation found that the extent of losses was larger than what was reported to the Cabinet and Parliament.

The inquiry panel said a hearing will begin Aug. 21 and that it will aim to submit a report to the king by Oct. 13. The panel can make recommendations on action to be taken against those found guilty, but it is up to the attorney-general to prosecute.

Mahathir has said the inquiry is a "desperate effort by Najib to silence his detractors." He and other opposition leaders have urged the government to also set up a formal inquiry into losses at 1MDB.

Malaysia's government has said it found no criminal wrongdoing at 1MDB. But the fund has been at the center of investigations in the U.S. and several countries amid allegations of a global embezzlement and money-laundering scheme. Najib started the fund shortly after taking office in 2009 to promote economic development projects, but it accumulated billions of dollars in debts.

The U.S. Justice Department says at least $4.5 billion has been stolen from 1MDB by people close to Najib and has initiated action to seize $1.3 billion it says was taken from the fund to buy assets in the U.S. The government complaints also say that more than $700 million has landed in the accounts of "Malaysian Official 1." They did not name the official, but appear to be referring to Najib.

Najib has resisted calls to resign, has clamped down on critics and continues to enjoy the unwavering support of most ruling-party members, but his real test will come in next year's elections. Najib's ruling coalition won the last elections in 2013 despite losing the popular vote to an opposition coalition.

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This story has been corrected to show that the Royal Commission of Inquiry has five members, not six.