Westpac settles AUSTRAC money laundering case with $1.3 billion fine

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Westpac has reached a deal with financial crime watchdog AUSTRAC to settle more than 23 million alleged breaches of anti-money laundering laws by paying a record $1.3 billion penalty.

The penalty is the biggest in Australian corporate history, and is almost double the previous record $700 million fine paid by the Commonwealth Bank for almost 54,000 money laundering breaches, revealed by the ABC in 2017.

In a statement, AUSTRAC said Westpac had admitted to breaching the Anti-Money Laundering and Counter-Terrorism Financing Act more than 23 million times.

These breaches included a failure to properly report more than 19.5 million international funds transfer instructions (IFTI) amounting to more than $11 billion.

AUSTRAC said the breaches included suspicious transactions associated with possible child exploitation as well as failure to assess risks of money laundering and terrorism financing.

“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 non-compliance,” AUSTRAC chief executive Nicole Rose said in the statement.

 

“Westpac’s failure to implement effective transaction monitoring programs, and its failure to submit IFTI reports to AUSTRAC and apply enhanced customer due diligence in relation to suspicious transactions, meant AUSTRAC and law enforcement were missing critical intelligence to support police investigations.”

 

In a statement, Westpac’s chief executive Peter King once again apologised for the contraventions.

“We are committed to fixing the issues to ensure that these mistakes do not happen again. This has been my number one priority,” he said.

“We have also closed down relevant products and reported all relevant historical transactions.”

‘Massive failure’

Treasurer Josh Frydenberg welcomed the settlement.

“This is a very significant penalty, and it reflects the significance of the offences here,” he told ABC Radio Melbourne.

“This should not have happened.

“Westpac are obviously taking steps to ensure it doesn’t happen again, but it’s also a message to all other financial institutions that AUSTRAC will take action where necessary to ensure that the law is complied with.”

Shadow Home Affairs Minister Kristina Keneally described Westpac’s announcement as “extraordinary”, and the bank’s lack of appropriate financial monitoring as a “massive failure”.

“What is incredibly distressing was the extent to which some of this money laundering appears to have been linked to child sexual exploitation,” Senator Keneally said.

She demanded the government push ahead with reforms to further strengthen anti-money laundering laws.

Management accountability still a FAR way off: Choice

The settlement with the Australian Transaction Reports and Analysis Centre (AUSTRAC) comes after intense legal negotiations with the financial crime agency in recent weeks.

Westpac had earlier set aside $900 million for a penalty after flagging that it intended to accept most of the charges levelled by AUSTRAC.

The scandal, which erupted in late 2019, forced the resignation of then Westpac chief executive Brian Hartzer and the retirement of chairman Lindsay Maxsted, along with other board and executive changes.

However, consumer group Choice said the lack of legal sanctions against Westpac’s senior management and board directors shows that personal executive accountability is still missing, given that shareholders will foot the bill for the penalty.

“This underlines the importance of the Federal Government acting on its commitment to pass the Financial Accountability Regime (FAR),” Choice’s chief executive Alan Kirkland said in a statement.

 

“If designed correctly, the FAR will be a game-changer for corporate culture in Australia’s financial services sector. Individual executives will not be able to hide behind large corporate pay-outs.

 

“This new regime will ensure that executives and senior managers of large financial institutions are subject to large civil penalties, disqualification, or deferred bonuses for breaches of the law.”

However, AUSTRAC’s boss argued the massive fine, and the fact some Westpac executives had lost their jobs, was a sufficient penalty.

“We don’t believe that there’s been criminal activity by the Westpac board,” Ms Rose said.

“If you look at the [agreed statement of facts] … it will actually take you through what we believe the failings were by the board, and they weren’t criminal.”

Ms Rose said the Westpac revelations, following the Commonwealth Bank’s penalty last year, had prompted banks and other organisations to be more diligent with their anti-money laundering requirements.

“Since the Commonwealth Bank action, we’ve had an incredible increase in suspicious matter reporting that’s come in,” she said.

“Businesses have really started to take this very, very seriously.”

By senior business correspondent Peter Ryan, business reporter Michael Janda and political reporter Matthew Doran (Original ABC Article)

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