Westpac to Pay Record Fine for 23 Million Money-Laundering, Terror-Financing Breaches
24 September 2020 - 12:58PM
Dow Jones News
By Alice Uribe
SYDNEY-- Westpac Banking Corp. has agreed to pay the largest
fine in Australian corporate history to settle a civil lawsuit that
revealed more than 23 million breaches of the country's
money-laundering and terrorism-financing laws.
Westpac, Australia's second-largest bank, said it would pay a
$920 million penalty for breaches that included a failure to detect
transfers that may have been used to facilitate child exploitation
in Asia.
The bank also said it had failed to report more than 19.5
million international transfers and didn't keep records relating to
the origin of some of them.
The proposed agreement with the federal government's
financial-intelligence agency, which remains subject to court
approval, includes further admissions by the bank it contravened
the law another 76,000 times.
"We are committed to fixing the issues to ensure that these
mistakes do not happen again," said Westpac Chief Executive Peter
King. "We have also closed down relevant products and reported all
relevant historical transactions."
The penalty of 1.3 billion Australian dollars, equivalent to
$920 million, follows legal proceedings brought by the Australian
Transaction Reports and Analysis Centre, or Austrac, in November
last year. Westpac said the additional breaches that came to light
following that claim meant the settlement was larger than a A$900
million provision made by the lender in May. That provision has now
been increased by A$404 million.
Australia's banks once held a reputation for being among the
world's safest and most profitable for investors, but a series of
scandals in recent years has rocked the country's top financial
institutions. The country's biggest lender, Commonwealth Bank of
Australia, in 2018 settled a case involving more than 53,700
money-laundering contraventions for A$700 million plus legal
costs.
Austrac Chief Executive Nicole Rose said the settlement sends a
strong message to the banking industry that it would act to ensure
Australia's financial system remains strong to prevent it being
exploited by criminals. "Our role is to harden the financial system
against serious crime and terrorism financing and this penalty
reflects the serious and systemic nature of Westpac's
noncompliance," she said.
In court documents filed last year, Austrac alleged Westpac's
infractions between 2013 and 2019 were "the result of systemic
failures in its control environment, indifference by senior
management and inadequate oversight by the board."
That led to a failure to properly assess and monitor the risks
in moving money in and out of the country and to carry out
appropriate due diligence on customers--who were known for
child-exploitation risks--sending money to the Philippines and
elsewhere in Southeast Asia, Austrac said.
Austrac alleged Westpac failed to carry out due diligence on 12
of its customers to manage known child-exploitation risks. In one
case, when a customer who had served jail time for child
exploitation opened a number of Westpac accounts, only one was
promptly identified as indicative of child exploitation. The
customer continued to send frequent low-value payments to the
Philippines through accounts that weren't being monitored
appropriately, Austrac said.
Westpac, which has a market value of $41.8 billion, changed its
chief executive soon after the lawsuit was filed by Austrac and
brought forward the retirement of its chairman.
An internal investigation by Westpac identified three main
causes of the compliance failures. Some areas of money laundering
and counterterrorism financing risk weren't sufficiently understood
within the company, the bank said. It was unclear who was
accountable for managing compliance with the laws, while the bank
didn't have enough staff working in that area, Westpac said.
The internal investigation also concluded that directors could
have recognized earlier the systemic nature of some of the
financial-crime issues that Westpac was facing. A total of 38
employees took a hit to their pay, including bonuses being
withheld. Some staff have been disciplined, Westpac said in June
when publishing the review's conclusions.
"We have recruited about 200 financial-crime people to the
group, created a new Group Executive position directly responsible
for improving our financial-crime capability, and established a new
Board Legal, Regulatory and Compliance subcommittee," Mr. King said
Thursday.
Write to Alice Uribe at alice.uribe@wsj.com
(END) Dow Jones Newswires
September 23, 2020 22:43 ET (02:43 GMT)
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