Shocking allegations against Westpac from AUSTRAC the financial intelligence agency, accusing the country’s oldest bank of systematically breaching Australia’s anti-money laundering and counter-terrorism finance laws 23 million times with claims that the breaches involve billions of dollars worth of transactions.
AUSTRAC’s claims, revealed yesterday in a statement from the agency include the shocking allegation that Westpac failed to properly vet transactions at risk of being linked to child exploitation.
The claims come around 18 months after Austrac made similar claims (of noncompliance with the money laundering and terror laws) against the Commonwealth Bank. Those claims involved around 57,000 claims.
The CBA ended up being fined $700 million for the much smaller group of offenses, Westpac’s potential fine could be in the billions of dollars.
The Reserve Bank of NZ was quick to issue a statement saying it was co-operating with Australian regulators. Deputy Governor and Head of Financial Stability Geoff Bascand said the Reserve Bank of New Zealand was made aware of AUSTRAC’s actions and is in close contact with counterparts across the Tasman in relation to this issue.
“We have a regular onsite programme with New Zealand banks to ensure compliance with New Zealand’s AML/CFT requirements, and will be looking closely at the Australian findings and if they have relevance for Westpac NZ.”
Investors reacted sharply, knocking well over $3.2 billion off the value of Westpac shares which fell 3.3% to $25.67 and helped push the market down by more than 90 points or 1.4% in a widespread sell-off.
“AUSTRAC alleges Westpac contravened the AML/CTF Act on over 23 million occasions,” the agency said in its statement.
Agency CEO Nicole Rose said in the statement: “These AML/CTF laws are in place to protect Australia’s financial system, businesses and the community from criminal exploitation. Serious and systemic non-compliance leaves our financial system open to being exploited by criminals.”
AUSTRAC said Westpac had failed to report more than 19.5 million “international funds transfer instructions” (IFTIs) over nearly five years. It said late IFTIs from four correspondent banks represented more than 72% of all incoming IFTIs received by Westpac.
“It is alleged that Westpac’s oversight of the banking and designated services provided through its correspondent banking relationships was deficient,” AUSTRAC said in its statement.
“Westpac’s oversight of its AML/CTF Program, intended to identify, mitigate and manage the money laundering and terrorism financing risks of its designated services, was also deficient. These failures in oversight resulted in serious and systemic non-compliance with the AML/CTF Act,” AUSTRAC said.
Westpac acknowledged the regulator’s lawsuit in a statement to the ASX noting that it had previously disclosed a large number of breaches in its financial results.
CEO Brian Hartzer said in the statement: “We recognise these are very serious and important issues. We are committed to assisting AUSTRAC and law enforcement agencies to stop financial crime.
“These issues should never have occurred and should have been identified and rectified sooner. It is disappointing that we have not met our own standards as well as regulatory expectations and requirements.
The bank said it would review the regulator’s statement of claim and make a further statement to the investors at a later time.
AUSTRAC said the breaches included a failure to “carry out appropriate customer due diligence on transactions to the Philippines and South East Asia that have known financial indicators relating to potential child exploitation risks.”
The regulator said the bank had failed to introduce “appropriate detection scenarios to detect known child exploitation typologies, consistent with Austrac guidance and their own risk assessments.”
AUSTRAC alleges 2,944 transactions totaling $480,000 that were indicative of child exploitation payments were made by 12 Westpac customers.
Ms. Rose said that the international funds transfers Westpac failed to report added up to more than $5 billion over five years.