Article image Australia's Westpac bank agrees record fine for money-laundering

Daniel Fowler
September 26, 2020

Westpac, one of Australia's largest banks, announced on Thursday, September 24, that it has agreed to pay a record 1.3 billion Australian dollar ($920 million) in fine with AUSTRAC, Australia's regulator that fights financial crime. 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.

According to AUSTRAC, among other offences, Westpac failed to properly report over 19.5 million worldwide transactions amounting to 11 billion Australian dollars (7.7 billion USA dollars), including with "known higher risk jurisdictions".

Australia's second-largest bank has been ordered to pay Austrac $1.3 billion after investigations previous year revealed it had allowed transactions and transfers that funded terrorism and human trafficking.

CEO Peter King said in a statement that he wishes to apologize for the bank's failure. "We are committed to fixing these issues to ensure that these mistakes do not happen again".

Banks may now have to deal with growing creativity of criminals to launder money across nations, and more stringent diligence must be practiced by the banks to counter the problems, especially in the worldwide money transfer systems.

The penalty reflects the "serious and systemic nature" of Westpac's non-compliance, AUSTRAC said in a statement Thursday.

In court documents filed past 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".

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That included customers who paid for child exploitation and live child sex shows in the Philippines and other parts of South East Asia. For reference, the Federal Court is still required to approve the proposed $1.3 billion penalty.

Westpac's chief executive, Brian Hartzer, subsequently resigned over the scandal, handing over to King, the bank's chief financial officer at the time.

According to reports circulated in the media, it is also alleged that a few Australian major banks have been named in latest FinCEN files and data released.

Attorney-General Christian Porter said while the amount seems high, it's appropriate to match the fine with the seriousness of charges.

The settlement comes at a fraught time for Australian banks in general, with a powerful inquiry a year ago accusing the industry of rampant fee-gouging and predatory sales tactics to inflate bonuses.

It is strengthening end-to-end financial crime risk management in the bank and has established accountabilities for the AML/CTF compliance.

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