(This Oct. 24 story has been refiled to correct the day to Thursday from Wednesday in paragraphs 1 and 4)

By Rozanna Latiff and Mandy Leong

KUALA LUMPUR (Reuters) - Jailed former Malaysia Prime Minister Najib Razak on Thursday issued a rare apology for his mishandling of the multibillion-dollar 1MDB financial scandal, but maintained he had no knowledge of illegal transfers from the now-defunct state fund.

1Malaysia Development Berhad (1MDB), a sovereign wealth fund co-founded by Najib in 2009 while he was premier, has faced corruption probes in at least six countries over the alleged misappropriation of over $4.5 billion by high-level officials of the fund and their associates.

Malaysia's top court in 2022 upheld a guilty verdict against Najib for corruption and money laundering for illegally receiving about $10 million from former 1MDB unit SRC International, sentencing him to 12 years in prison. The sentence was later halved by a pardons board chaired by Malaysia's former king.

Najib, 71, has consistently denied wrongdoing and on Thursday expressed remorse about the 1MDB scandal in a letter read at a press conference by his son, Mohamad Nizar Mohd Najib.

"It pains me every day to know that the 1MDB debacle happened under my watch as minister of finance and prime minister," the former premier said, according to the letter.

"For that, I would like to apologise unreservedly to the Malaysian people."

Najib said while he initiated investigations into 1MDB, he should have acted differently when questions about its dealings first arose, adding his concerns at the time were its finances and the diplomatic risks the scandal posed.

Malaysian anti-graft investigators have previously said their probes into 1MDB during Najib's tenure had been blocked, with witnesses disappearing and death threats made against them.

'DEEP SHOCK'

Najib's statement comes just days after Malaysia, in its budget plans for 2025, said it would propose a new law that would allow house arrest as an alternative punishment for certain offences.

Najib has been pushing to serve the remainder of his sentence at home and is seeking to compel the government to confirm the existence of a royal order that he says came with the pardon and recommended house arrest for him.

Najib said he was still "in deep shock" and deeply regretted the 1MDB scandal but maintained his innocence, citing a news report alleging that fugitive businessman Jho Low and two executives at Saudi oil firm Petrosaudi colluded to siphon SRC funds without the ex-premier's knowledge in 2009 and 2010.

Low faces charges in the United States and Malaysia for his alleged central role in the scandal, while the two Petrosaudi executives were convicted by a Swiss court in August for embezzling 1MDB funds. The three men had denied wrongdoing.

"Being held legally responsible for things that I did not initiate or knowingly enable is unfair to me and I hope and pray that the judicial process will, in the end, prove my innocence," Najib said.

He reiterated his belief that the funds he received at the time were political donations from Saudi Arabia. He did not address later allegations of money transfers from 1MDB.

Authorities have said Najib received more than $1 billion traceable to 1MDB, including a $681 million transfer in 2013. He has denied that.

Najib faces several other graft trials. A Malaysian court is set to determine on Oct. 30 whether to acquit him or ask him to enter his defence on money laundering and corruption charges in a 1MDB-related case.

(Reporting by Rozanna Latiff and Mandy Leong; Editing by Martin Petty)