Malaysia's attorney-general says US$681 million ($1 billion) transferred into Prime Minister Najib Razak's personal bank account was a gift from the royal family in Saudi Arabia and that there are no criminal offences or corruption involved.

The involvement of the Saudi royal family is an unexpected twist in a scandal over the mysterious funds transfer and the troubles of indebted state fund 1Malaysia Development Berhad (1MDB), whose advisory board Najib chairs.

"I am satisfied with the findings that the funds were not a form of graft or bribery," the Attorney-General, Mohamed Apandi Ali, told a hastily called news conference yesterday, where a statement was issued that said Najib had returned US$620 million to the royal family because it had not been used.

"There was no reason given as to why the donation was made to PM Najib," Apandi said.


He said no criminal offence was committed by Najib in relation to three investigations submitted by Malaysia's anti-graft agency and that no further action would be taken.

The Anti-Corruption Commission had earlier said the funds were a political donation from an unidentified Middle Eastern benefactor.

Najib, who has weathered months of calls to resign, has denied any wrongdoing.

The scandal has shaken investors in Malaysia and rocked public confidence in the coalition led by Najib's United Malays National Organisation party, which has held power since independence in 1957.

However, Najib still enjoys the backing of most of UMNO's powerful division chiefs. Even his fiercest internal critics, such as influential former Prime Minister Mahathir Mohamad, accept that he cannot be unseated.