Another headache for Westpac is in the offing after the key banking regulator, APRA revealed that the bank could face fines and the disqualification of its senior management over the money laundering and terrorism financing law breaches outlined by AUSTRAC.
APRA’s move comes as the corporate regulator, ASIC is investigating Westpac over possible breaches of the laws that the regulator administers – the main law is the Corporations Act and the investigation is said to be centred on the banks disclosures about the AUSTRAC breaches.
During questioning during a parliamentary hearing on Monday, APRA chair Wayne Byres said the regulator would confirm by the end of this month whether it was launching proceedings under the Banking Executive Accountability Regime (BEAR) for the 23 million money-laundering breaches allegedly made by the bank.
Mr. Byres said the obligations under BEAR were two-fold – one relates to the bank itself and its level of cooperation with APRA and the other is concerned with the accountability of individuals at the bank, such as directors and executives.
The BEAR requires all deposit-taking institutions to lodge an “accountability map” to APRA declaring the names and responsibilities of senior management and executives.
“Each of those accountable persons has their own obligations under the BEAR regime – to act honestly, conduct their affairs with due skill and diligence and to make sure they don’t do anything that might unduly jeopardise the current standing of the bank.”
He said a failure to adhere to those obligations allows APRA to seek fines from the court.
Based on the $700 million fine levied on the Commonwealth by APRA over its 57,000 breaches of the money laundering laws for cash deposits and transfers internationally, Westpac could be facing a fine of double that or more.
APRA also imposed a $1 billion capital overlay charge on the CBA – it has to hold the extra capital and can’t put it to work in the bank’s operations (by using it to finance home loans etc).
Based on that precedent, Westpac could be facing a capital overlay charge of over $2 billion. These charges are open-ended and only removed by APRA.
Investors ignored this news and Westpac shares rose 0.3% to 4224.60.