Australian anti-money laundering regulator alleges more than 23 million contraventions of the law by Westpac Banking Corporation with the RBNZ 'looking closely' for any relevance to Westpac NZ

Australian anti-money laundering regulator alleges more than 23 million contraventions of the law by Westpac Banking Corporation with the RBNZ 'looking closely' for any relevance to Westpac NZ

The Reserve Bank of New Zealand (RBNZ) says it will be looking closely at an Australian case where Westpac Banking Corporation is alleged to have contravened anti-money laundering laws more than 23 million times for any relevance for Westpac New Zealand.

AUSTRAC, Australia’s anti money-laundering and terrorism financing regulator, has applied to the Federal Court for civil penalty orders against Westpac Banking Corporation, which is Westpac NZ's parent.

"The civil penalty orders relate to systemic non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). AUSTRAC alleges Westpac contravened the AML/CTF Act on over 23 million occasions. AUSTRAC Chief Executive Officer, Nicole Rose, says that AUSTRAC’s decision to commence civil penalty proceedings was made following a detailed investigation into Westpac’s non-compliance," AUSTRAC says.

AUSTRAC alleges Westpac Banking Corporation’s oversight of the banking and designated services provided through its correspondent banking relationships was deficient. It says the bank's oversight of its AML/CTF programme, intended to identify, mitigate and manage the money laundering and terrorism financing risks of its designated services, was also deficient.

"These failures in oversight resulted in serious and systemic non-compliance with the AML/CTF Act," says AUSTRAC.

Following AUSTRAC's announcement the RBNZ says it's working closely with Australian regulatory counterparts. The RBNZ oversees NZ banks for compliance with the NZ AML/CFT Act.

"The Reserve Bank of New Zealand was made aware of AUSTRAC’s actions and is in close contact with counterparts across the Tasman in relation to this issue," RBNZ Deputy Governor and Head of Financial Stability Geoff Bascand says.

“We have a regular onsite programme with New Zealand banks to ensure compliance with New Zealand’s AML/CFT requirements, and will be looking closely at the Australian findings and if they have relevance for Westpac NZ. The Reserve Bank will not be commenting further at this stage."

For its part the Westpac Banking Corporation says it has previously disclosed, including in its recent annual financial results, that it had self-reported a failure to report a large number of international funds transfer instructions to AUSTRAC and that AUSTRAC was also investigating a number of other areas relating to Westpac's processes, procedures and oversight.

"Westpac is currently reviewing AUSTRAC's statement of claim and will issue a further statement to the ASX once it has been assessed," Westpac Banking Corporation says.

A spokesman for Westpac NZ, meanwhile, says the AUSTRAC proceedings relate to Westpac Banking Corporation and Australian AML/CTF laws.  

"The proceedings do not relate to Westpac New Zealand which is subject to New Zealand AML/CFT laws. We regularly engage with the Reserve Bank of New Zealand about AML/CFT obligations and will continue to do so," the Westpac NZ spokesman says.

'Known financial indicators relating to potential child exploitation risks'

Among AUSTRAC's allegations is that Westpac Banking Corporation; "failed to carry out appropriate customer due diligence on transactions to the Philippines and South East Asia that have known financial indicators relating to potential child exploitation risks. Westpac failed to introduce appropriate detection scenarios to detect known child exploitation typologies, consistent with AUSTRAC guidance and their own risk assessments."

Each of Westpac Banking Corporation's alleged contraventions of the AML/CTF Act faces a potential penalty in the millions of dollars.

In June last year ASB's parent Commonwealth Bank of Australia (CBA) agreed to pay an A$700 million fine to resolve AUSTRAC Federal Court proceedings relating to breaches of AML/CTF laws. After news of that case broke in 2017 the RBNZ quizzed local banks, including ASB, about issues related to their ATMs, which were at the centre of the CBA case.

The recent annual report from BNZ's parent National Australia Bank (NAB) noted NAB has reported a number of AML/CTF compliance breaches to relevant regulators and has responded to a number of requests from regulators requiring the production of documents and information.

"Identified issues include certain weaknesses with the implementation of ‘Know Your Customer’ requirements, other financial crime risks, as well as systems and process issues that impacted transaction monitoring and reporting in some specific areas. NAB continues to keep AUSTRAC, and where applicable, relevant foreign regulators, informed of its progress in resolving these issues, and will continue to cooperate with, and respond to queries from, such regulators. As this work progresses, further issues may be identified and additional uplifting and strengthening may be required. The potential outcome and total costs associated with the investigation and remediation process for specific issues identified to date, and for any issues identified in the future, remain uncertain," NAB said.

AUSTRAC's statement is below. And its statement of claim is here.  

AUSTRAC applies for civil penalty orders against Westpac

20 Nov 2019

AUSTRAC, Australia’s anti money-laundering and terrorism financing regulator, has today applied to the Federal Court of Australia for civil penalty orders against Westpac Banking Corporation (Westpac).

The civil penalty orders relate to systemic non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). AUSTRAC alleges Westpac contravened the AML/CTF Act on over 23 million occasions.

AUSTRAC Chief Executive Officer, Nicole Rose, says that AUSTRAC’s decision to commence civil penalty proceedings was made following a detailed investigation into Westpac’s non-compliance.

It is alleged that Westpac’s oversight of the banking and designated services provided through its correspondent banking relationships was deficient. Westpac’s oversight of its AML/CTF Program, intended to identify, mitigate and manage the money laundering and terrorism financing risks of its designated services, was also deficient. These failures in oversight resulted in serious and systemic non-compliance with the AML/CTF Act.

Westpac failed to: 

  1. appropriately assess and monitor the ongoing money laundering and terrorism financing risks associated with the movement of money into and out of Australia through correspondent banking relationships. Westpac has allowed correspondent banks to access its banking environment and the Australian Payments System without conducting appropriate due diligence on those correspondent banks and without appropriate risk assessments and controls on the products and channels offered as part of that relationship.
  2. report over 19.5 million International Funds Transfer Instructions (IFTIs) to AUSTRAC over nearly five years for transfers both into and out of Australia. The late incoming IFTIs received from four correspondent banks alone represent over 72% of all incoming IFTIs received by Westpac in the period November 2013 to September 2018 and amounts to over $11 billion dollars. IFTIs are a key source of information from the financial services sector that provides vital information into AUSTRAC’s financial intelligence to protect Australia’s financial system and the community from harm.
  3. pass on information about the source of funds to other banks in the transfer chain. This conduct deprived the other banks of information they needed to understand the source of funds to manage their own AML/CTF risks.
  4. keep records relating to the origin of some of these international funds transfers.
  5. carry out appropriate customer due diligence on transactions to the Philippines and South East Asia that have known financial indicators relating to potential child exploitation risks. Westpac failed to introduce appropriate detection scenarios to detect known child exploitation typologies, consistent with AUSTRAC guidance and their own risk assessments.

“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,” Ms Rose said.

“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.”

AUSTRAC’s approach to regulation is based on building resilience in the financial system and on educating the financial services sector to ensure they understand, and are able to comply with, their compliance and reporting obligations. Businesses are the first line of defence in protecting the financial system from abuse.

“We have been, and will continue to work with Westpac during these proceedings to strengthen their AML/CTF processes and frameworks,” Ms Rose said.

“Westpac disclosed issues with its IFTI reporting, has cooperated with AUSTRAC’s investigation and has commenced the process of uplifting its AML/CTF controls.”

Westpac is a member of the Fintel Alliance. The Fintel Alliance is a private-public partnership established by AUSTRAC to tackle serious financial crime, including money laundering and terrorism financing.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Well, if this is anyhow related to the enabling of transactions for and custodian of child pornography operations (and it is), this is going to be (or should be IMO) catastrophic for the Westpac brand. Heads should roll.

Might be time to remove the contract for government banking services from Westpac, to Kiwibank. Time to think of the wider benefits to NZ inc of circulating profit locally, rather than overseas interests the previous National Government were more interested in doing.

I see the previous Government are showing signs of this by providing life support to the Hillsdene in Dunedin, which got completely ignored by Naional party puppet Jim Quin which could have built the rail stock. This would and could have kept skills local, including PAYE and profits. Wonder what donations National received from the successful overseas bidder?

13
up

Holy moly. That's a shocker.
Intentionally deficient?
Billions of laundered Chinese money has fuelled the Australasian housing bubble very nicely, so it's easy to be cynical.
Interesting times....

Yes it still amazes me just how they can get away with it. Wouldn't be surprised to find that the other big Ozzy banks are just as guilty of this so called oversight. ABC News: Real Estate: dirty money laundered through Australian housing. https://www.youtube.com/watch?time_continue=13&v=-A_lH4S3ufA&feature=emb...

NZ is clean, it's not going to happen here.. as JK Said while on the helm, then the findings, then the recommendations, then... abandon ship. Have no more gas in the tank, to fence off all these probings ;-)

Ha ha.

Whilst seemingly delaying introducing anti-money-laundering legislation for as long as possible.

Yep it was Labour who had to enforce the AML rules to see the main second phase through. And it was the NZ Real Estate industry that dragged its feet on adopting the new regulations so they could keep looking the other way,

People might call that failure to act moral corruption, quite reasonably.

Thanks for your coverage Gareth. This is headline news in Australia, but there's barely anything on the MSM here.

In response, Scott Morrison says "banks need to lift their game." He's an evangelical Christian apparently.

A very gentle slap on the wrist. They are all in this together, with their snouts in the trough.
Anyone else watched 'Spirited Away'? The early scenes of the gluttonous pigs reminds me of this whole debacle.

'Spirited Away', many times voted best animated movie ever.
Do watch it.

Fines... fines... fines. The millions in fines are merely a cost to the body corporate and, possibly, to stockholders. Since the GFC financial institutions globally have treated their fines as no more than a cost of doing business, while, for the sanctioning authorities, the fines are useful income. It's a mutually supportive, symbiotic relationship that no party with its finger in the financial pie wishes to damage. Both parties lift the corner of the carpet and sweep the behaviour out of sight. What sanction, eg, for ANZ's outrageous property dealing for the benefit of its previous CEO?

Nothing will change until the penalties are changed from a cost of doing business to a matter of personal responsibility for leadership, indeed.

Some principled customers might change banks?

Fines... fines... fines. The millions in fines are merely a cost to the body corporate and, possibly, to stockholders. Since the GFC financial institutions globally have treated their fines as no more than a cost of doing business, while, for the sanctioning authorities, the fines are useful income.

Yes indeed - but in some cases of significant fines imposed by US authorities upon foreign banks, they paid to resolve accusations they violated U.S. sanctions (not international law) against Sudan, Cuba and Iran. In other words, extortion. Link

Audaxes,

banks seem to be incapable of reforming themselves. Every new revelation reminds me of the fable of the scorpion and the frog. Look it up if you don't already know it. I have just finished reading Laundromat, the story of Mossack Fonseca and as always, banks feature heavily.

Light touch regulation simply doesn't work, nor do fines, however large. The culture of any company comes from the top and that is where the regulators have to go. Individuals-senior management and board directors must be sanctioned, both financially and reputationally. In the worst cases, executives have to know that prison is a real possibility.

The fine should be that each customer of the bank, depositor or borrower should be paid $1000 and be issued an apology letter. That would show these Big Banks which operate usually like a cartel, giving scant respect to the regulator, government and the customers. Hope a strong Central Bank Governor initiates such a measure.

Apparently it's not just Westpac. National Australia Bank, which owns Bank of New Zealand, said in its annual report published last week that it too is facing an AUSTRAC investigation that could result in serious penalties.
NZ Herald: RBNZ working with counterparts after Westpac Australia anti-money laundering claim
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=122...

Curious, there's a small item on the Herald website, way down the pecking order.
Sinister relegation of a major news item, or just more small town Kiwi news behavior (like One News putting Hong Kong events way down the pecking order)

Meanwhile, back here in N.Z. for any wage slave needing to supply a bank account to their employer to receive their wages, we've got....
https://www.rbnz.govt.nz/news/2019/07/reserve-bank-dashboard-celebrates-...

"displaying more than 100 individual metrics on the financial strength of banks that cover seven subject areas including Credit Rating, Asset Quality and Profitability"

No mention of compliance that I can see on their dashboard.

Assuming 23 million contraventions at the lower end of those maximum penalties, that amounts to a potential fine of $391 trillion.

Well, that's not going to happen!
More than likely there'll be an investigation, followed by an enquiry, followed by a recommendation, followed by a new set of safeguards and a penalty of, oh I don't know, $690 million ( $30 per infringement!) to reimburse AUSTRAC for their out of pocket expenses. Maybe even a new senior manager or two; the present ones retiring gracefully.
If we haven't realised that management at banks, and not only banks, aren't out to make the most of the relatively short time they have to do so, then we haven't been looking - and most people haven't and don't care. All they care about is ( pick your favourite topic and insert, here)
Something's gone horribly wrong with The System, and it started about 25 years ago. Those who tried to alert senior management to what was happening suddenly found themselves 'promoted' out of harm's way. How does it end? I don't know; but well, doesn't seem like it will be it.

So what was the penalty levied on the bank ? How many $$$$ ? Will customers get any of it ?

No penalties yet: "AUSTRAC, Australia’s anti money-laundering and terrorism financing regulator, has applied to the Federal Court for civil penalty orders against Westpac Banking Corporation

It'll be years before any penalties get handed down.

Instead of bailing out, let one bank be compulsority liquidated, to show these banks that the regulators and the governments mean business...I am sure some Asian countries would do so. India recently did away with a few public sector banks which were under performing. China would do it silently also punish the executives involved.

What is PM"s department thinking.
Or is this the way they roll....

Westpac Government Banking
At Westpac, we have a proud history of working with the New Zealand Government as its banker since 1989. Throughout our relationship we have continued to deliver the core payment needs of the Government and innovated together to improve service delivery.

https://www.westpac.co.nz/wib/relationship-management/government-banking/

Better Dwelling: How A Little Money Laundering Can Have A Big Impact On Real Estate Prices
https://betterdwelling.com/how-a-little-money-laundering-can-have-a-big-...

Is it any wonder just how screwed up both NZ and Australia's property is, with all that dodgy money!
"After 13 years of empty bipartisan promises about “Tranche 2” AML/CTF laws, the deeper question needs to be asked: does Australia really have the political fortitude to dam those rivers of illicit money? Or is our economic model too precarious, and our democracy too feeble, to risk taking some juice out of the politically sacred property market?"

MW article: FATF caves as Australia keeps propping up property market with black money
https://www.michaelwest.com.au/fatf-caves-as-australia-keeps-propping-up...

It's a double whammy. It's dirty, immoral money. And it's contributed to locking many young Aussies and Kiwis out of property.
Despicable, really. And the government and banks have been complicit.

This one’s bad, the banking equivalent of an exposed reactor core.

If you don't want to support the wilful financing of terrorism, trafficing and money laundering - don't bank with Westpac.

In terms of relevance to Westpac NZ, what would that be?
Money transferred through the chain to or from anyone of the 23,000,000 transactions? Can we get an answer?

Anyone watch the NZ1 news item last night detailing this?
The blond one said that Westpac were looking at fines totaling 300 trillion.....

Is there that much cash in the world?

Who were the auditors over the last 5 years. Surely they will be in the gun as well? They were complicit in this scandal.