Westpac could face unprecedented civil penalties, having been accused of contravening AML/CTF laws on over 23 million occasions by Australia’s anti money-laundering and terrorism financing regulator, Austrac.
Following a detailed investigation into Westpac’s non-compliance, Austrac filed the orders with the Federal Court of Australia which detail the extent of the bank’s eye-watering failings. Each breach of money laundering laws has the potential to incur a penalty between A$17 and A$21 million.
According to the application filed, Westpac failed to:
- Appropriately assess and monitor money laundering and terror financing risks by allowing correspondent banks to access its banking environment and the Australian Payments System without proper due diligence or risk assessment;
- Report to Austrac more than 19.5 million International Funds Transfer Instructions (IFTIs) over a period of almost five years, amounting to over A$11 billion;
- Pass on information about the source of funds to other banks in the transfer chain;
- Keep records relating to the origin of certain funds transfers; and
- Carry out appropriate customer due diligence on transactions made to the Philippines and South East Asia with known links to child exploitation threats.
The Sydney Morning Herald reports that one Westpac customer had opened a series of accounts with the bank and had made suspicious transactions to the Philippines which indicated child exploitation.
Nicole Rose, chief executive officer, Austrac says: “These AML/CTF laws are in place to protect Australia’s financial system, businesses and the community from criminal exploitation. Serious and systemic non-compliance leaves our financial system open to being exploited by criminals.
“The failure to pass on information about IFTIs to AUSTRAC undermines the integrity of Australia’s financial system and hinders Austrac’s ability to track down the origins of financial transactions, when required to support police investigations.”
This follows the penalty paid by the Commonwealth Bank of Australia’s (CBA) $700 million (AUD) last year following breaches to AML and CTF laws including the failure to monitor thousands of transactions made through its smart ATMs. Given the deep-seated distrust of banks following February’s findings by the Royal Commission into Misconduct in Banking, the question of Australia finding trust in its banking system is more out of reach than ever before.
In a statement, Westpac CEO Brian Hartzer admits to the bank's culpability and pledges that it will work to improve and bolster the management of financial crime risks including strengthening policies, data feeding systems, processes and controls.
“We recognise these are very serious and important issues. We are committed to assisting Austrac and law enforcement agencies to stop financial crime," he says. “These issues should never have occurred and should have been identified and rectified sooner. It is disappointing that we have not met our own standards as well as regulatory expectations and requirements."