Westpac Shares Unmoved Despite Record-Breaking Fine

By Glenn Dyer | More Articles by Glenn Dyer

As reported yesterday Westpac has confirmed a massive $1.3 billion in penalties relating to more than 23 million breaches of anti-money laundering rules.

The country’s second-largest bank has been ordered to pay the fine to the financial intelligence group, AUSTRAC after investigations last year revealed it had allowed transactions and transfers that funded terrorism and human trafficking (Child abuse in the Philippines).

The news hardly impacted Westpac shares – they down 0.1% at $16.37.

In April Westpac set aside $900 million in its 2020 half-year results in anticipation of a fine. That amount includes an additional $160 million to improve its financial crimes detection procedures and donations to child exploitation agencies.

Westpac has now increased this provision by $404 million to account for the higher penalty and AUSTRAC’s legal costs of $3.75 million.

That will make a big hole in the bank’s results.

A dispute between Austrac and Westpac was lodged in the federal court earlier this year to determine the total payout and the number of breaches.

In a statement issued on Thursday, Westpac admitted to the total number of breaches claimed by Austrac.

The bank had originally admitted to about 19 million of the financial crime violations after an internal probe, instead of the 23 million alleged by the regulator.

Westpac chief executive Peter King said in the statement that the bank was apologetic for its failings relating to the historical transactions, which were not flagged as suspicious at the time.

“We are committed to fixing the issues to ensure that these mistakes do not happen again,” he said.

“This has been my number one priority. We have also closed down relevant products and reported all relevant historical transactions.”

Westpac’s fine almost doubles the $700 million the Commonwealth Bank had to pay AUSTRAC in 2018 for separate breaches of money laundering laws.

Under the settlement with AUSTRAC, Westpac has admitted it failed to properly report over 19.6 million international transfers totalling over $11 billion.

The bank also failed to keep records and monitor risks associated with money moving into and out of Australia through its correspondent banking relationships, including those institutions in higher-risk jurisdictions. (such as the Philippines).

Westpac has also admitted it failed to carry out appropriate due diligence on its customers, with 284 clients making transactions indicative of suspicious activity including child exploitation in South East Asian countries.

AUSTRAC chief executive Nicole Rose said the penalty sent a strong message to the financial industry to take compliance seriously.

Westpac’s failure to comply with anti-money laundering laws meant AUSTRAC and law enforcement were missing critical intelligence needed to support police investigations, Ms. Rose said.

In June Westpac released the findings of its own investigation into the compliance breaches, with two investigations blaming technology failures, management misjudgments and poor systems for the breaches.

The case saw the CEO and chair of the bank leave, along with other board members and senior executives who departed when the new CEO, Peter King was appointed in April. He had been due to leave the bank about now but was convinced to stay on when Brian Hartzer quit.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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