Record $1.3bn money-laundering fine for Australian bank
28 Sep 2020
Australian bank Westpac is to pay a record fine of A$1.3bn (£722m) after admitting more than 23 million breaches of money-laundering laws
28 Sep 2020
The penalty has been imposed by AUSTRAC (the Australian Transaction Reports and Analysis Centre), the agency responsible for detecting, deterring and disrupting criminal abuse of the financial system.
It relates to Westpac’s compliance failures in meeting the requirements of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).
Westpac admitted to the regulator that the bank had failed to properly report over 19.5m International Funds Transfer Instructions (IFTIs) amounting to over A$11bn.
It did not pass on information relating to the origin of some of these international funds transfers, and failed to pass on information about the source of funds to other banks in the transfer chain, which these banks needed to manage their own money laundering and terrorism financing risks.
In addition, the bank admitted it did not keep records relating to the origin of some of these international funds transfers. Nor did it appropriately assess and monitor the risks associated with the movement of money into and out of Australia through its correspondent banking relationships, including with known higher risk jurisdictions.
The bank also said it had failed to carry out appropriate customer due diligence in relation to suspicious transactions associated with possible child exploitation.
In reaching the agreement, Westpac has also admitted to approximately 76,000 additional contraventions which expand the original statement of claim.
These new contraventions relate to information that came to light after the civil penalty action was launched last year and relate to additional IFTI reporting failures, failures to reasonably monitor customers for transactions related to possible child exploitation, and two further failures to assess the money laundering and terrorism financing risks associated with correspondent banking relationships.
Nicole Rose, AUSTRAC’s chief executive officer, said: ‘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.
‘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.’
Rose said such a large number of breaches over several years was unacceptable and could have been avoided with better assurance and oversight processes to identify ongoing reporting failures.
The Federal Court of Australia will now consider the proposed settlement and penalty. If the Federal Court determines the proposed penalty is appropriate, the penalty order made will represent the largest ever civil penalty in Australian history.
Westpac group chief executive Peter King said: ‘I would like to apologise sincerely for the bank’s failings.
‘We are committed to fixing the issues to ensure that these mistakes do not happen again. This has been my number one priority. We have also closed down relevant products and reported all relevant historical transactions.
‘This agreement is an important step in the court process. It provides more certainty to all our stakeholders as we continue to implement the measures in our response plan and complete the recommendations from the review s that have been conducted.’
King said the bank has recruited some 200 financial crime specialists, created a new group executive position directly responsible for improving its financial crime capability and established a new board legal, regulatory and compliance committee. It has also undertaken a ‘reassessment of our culture, governance and accountability’.
Westpac provided for an estimated penalty of A$900m related to the AUSTRAC charges in its first half 2020 results, and the bank has now increased that provision by a further A$404m to account for the higher estimated penalty and AUSTRAC’ legal costs.