On Aug 24 last year, China-based Silk Road Southeast Asia Real Estate Ltd (Silk Road) paid 1MDB 4.25 billion yuan (RM2.7 billion), ostensibly to purchase the state-owned fund's 234 acres of land in Ayer Itam, Penang.

But the Penang government had imposed a freeze on the land held under 1MDB subsidiary MyCity Ventures Sdn Bhd, which made it impossible to transfer the land titles to the buyer.

Strangely, Silk Road was quite happy to fork out the billions without getting the land, according to a parliamentary written reply by Finance Minister Lim Guan Eng to Bukit Bendera MP Wong Hon Wai.

The Edge Financial Daily reported that it is now suspected this transaction was used as a front to launder a China Exim Bank loan intended for the RM9.4 billion pipeline project under Suria Strategic Energy Resources Sdn Bhd (SSER) to pay off 1MDB's debts.

It was previously reported that SSER had paid the pipeline contractor China Petroleum Pipeline Bureau, a Chinese state-owned company, US$2 billion (RM8.13 billion) or 88 percent of the project value, even though less than 15 percent of the work had been completed.

"The money is suspected to have originated from the project's financing via China Exim Bank before travelling to the Middle East, and returning to Malaysia where it was transacted for the land, and later used to service the US$3.5 billion International Petroleum Investment Company (IPIC) loan," the report said.

For context, the Aug 24 transaction for 1MDB's land last year took place just six days before 1MDB paid the first tranche of a US$1.2 billion settlement with IPIC.

The settlement payment was to have taken place on July 31 but 1MDB had requested for a one-month extension.

At that time then prime minister Najib Abdul Razak told Parliament that the delay was due to a "technicality" and not because 1MDB could not fork out the sum.

Quoting a source familiar with the matter, The Edge Financial Daily said the Ayer Itam land sale reeked of money laundering.

"Why would you throw so much money and not ask for the transfer of titles? The obvious answer is money laundering.

"The Chinese company (Silk Road) did not care about the land because it was not their money anyway. There is no money trail evidence in China but it is quite obvious," the source was quoted as saying.

The source was also quoted as saying that Silk Road did ask for the transfer of titles some time back, but did not bother following up on it.

It was previously reported that the land was very difficult to develop due to many encumbrances.

The report said there are some 1,200 to 1,400 ground tenants have occupied the land for more than 50 years.

"Moving them out would be a very expensive and long-drawn affair," it said.