Westpac Banking Group and Australian anti-money laundering regulator AUSTRAC agree for bank to pay A$1.3 billion penalty for 23 million contraventions of Australia's Anti-Money Laundering and Counter-Terrorism and Financing Act

Westpac Banking Group and Australian anti-money laundering regulator AUSTRAC agree for bank to pay A$1.3 billion penalty for 23 million contraventions of Australia's Anti-Money Laundering and Counter-Terrorism and Financing Act

Westpac Banking Corporation, parent of Westpac New Zealand, has agreed to pay an A$1.3 billion penalty for admitted contraventions of Australia's Anti-Money Laundering and Counter-Terrorism and Financing (AML/CTF) Act.

Australia's anti-money laundering regulator AUSTRAC, which brought the case against Westpac, says the Federal Court of Australia will now consider the proposed settlement and penalty. If the Federal Court agrees the penalty is appropriate, it will be the biggest ever civil penalty in Australian history, AUSTRAC says.

Westpac has provided for an A$900 million penalty, and says it will increase the provision in its September year accounts by a further A$404 million to cover the higher estimated penalty and additional costs, including AUSTRAC’s A$3.75 million legal costs.

"Westpac has admitted to contravening the AML/CTF Act on over 23 million occasions, exposing Australia’s financial system to criminal exploitation," AUSTRAC says.

“I would like to apologise sincerely for the Bank’s failings," Westpac Group CEO Peter King said. “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."

Here's AUSTRAC's statement.

AUSTRAC and Westpac agree to proposed $1.3bn penalty

Westpac and AUSTRAC have today agreed to a 1.3 billion dollar proposed penalty over Westpac’s breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). Westpac and AUSTRAC have agreed that the proposed penalty reflects the seriousness and magnitude of compliance failings by Westpac.

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. 

In reaching today’s agreement, Westpac has admitted to contravening the AML/CTF Act on over 23 million occasions, exposing Australia’s financial system to criminal exploitation.

In summary, Westpac admitted that it failed to:

  • Properly report over 19.5 million International Funds Transfer Instructions (IFTIs) amounting to over $11 billion dollars to AUSTRAC.
  • Pass on information relating to the origin of some of these international funds transfers, and to pass on information about the source of funds to other banks in the transfer chain, which these banks needed to manage their own ML/TF risks.
  • Keep records relating to the origin of some of these international funds transfers.
  • 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.
  • 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.

AUSTRAC’s Chief Executive Officer, Nicole Rose PSM said the settlement sends a strong message to industry that AUSTRAC will take action to ensure our financial system remains strong so it cannot be exploited by criminals.

“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,” Ms Rose said.

“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.”

Ms 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.

AUSTRAC works in partnership with the businesses we regulate through a comprehensive industry education program.

“We have been, and will continue to work collaboratively with Westpac and all businesses we regulate to support them to meet their compliance and reporting obligations to ensure this doesn’t happen again in the future.”

Westpac continues to partner with AUSTRAC to assist AUSTRAC and law enforcement agencies to stop financial crime, including as a member of AUSTRAC’s private-public partnership the Fintel Alliance.

Here's Westpac's statement.

Westpac and AUSTRAC reach agreement on AML/CTF civil proceedings subject to Federal Court approval

Westpac Group has today announced it has reached an agreement with AUSTRAC to resolve the civil proceedings commenced in the Federal Court of Australia on 20 November 2019.

Under the agreement, the parties have today, agreed to:
• file with the Federal Court a Statement of Agreed Facts and Admissions
• recommend to the Court that Westpac pay a civil penalty of $1.3 billion in relation to admitted contraventions of the Anti-Money Laundering and Counter-Terrorism and Financing Act 2006 (AML/CTF Act).

As part of the agreement, Westpac has admitted to additional contraventions that are outlined in the amended statement of claim, and which contribute to the agreed penalty.

Westpac Group Chief Executive Officer, 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 implementation of recommendations from the reviews that have been conducted,” he said.

In June, Westpac released the findings from its investigation into its AML/CTF compliance issues as well as the Advisory Panel Report on governance and accountability.

“Westpac is taking action to address the areas where we have failed and are implementing all the recommendations of the Advisory Panel Report,” Mr King said.

“We are strengthening our financial crime capability. We acknowledge the important role Westpac must play in protecting the integrity of the financial system. As part of this process we are improving our end-to-end financial crime risk management processes and have established clearer accountabilities for AML/CTF compliance.

“Westpac has made substantial investments to strengthen its systems, processes, and controls to detect and report suspicious transactions.

“We have recruited about 200 financial crime people to the group, created a new Group Executive position directly responsible for improving our financial crime capability, and established a new Board Legal, Regulatory and Compliance subcommittee,” he said.

“We have also undertaken a reassessment of our culture, governance and accountability and are embarking on a comprehensive, multi-year program to strengthen how we manage non-financial risk across the Group. This includes a significant investment in training to support our people to better identify, assess and manage risks.

“We are determined to continually lift our financial crime standards, comply with our obligations and uphold our customer, community, and regulatory expectations,” Mr King said.

Westpac in its First Half 2020 results provided for an estimated penalty of $900 million, and associated costs at which time the bank noted the proceedings were complex and ongoing, and the ultimate penalty following either a settlement or a hearing, and in each
case as determined by the Court may be materially higher or lower than the amount provided for. The penalty that Westpac and AUSTRAC will recommend to the Court reflects the outcome of ongoing review and dialogue with AUSTRAC. Westpac will increase the provision in its accounts for the year ending 30 September 2020 by a further $404 million to account for the higher estimated penalty and for additional costs, including AUSTRAC’s legal costs of $3.75 million.

The Statement of Agreed Facts and Admissions is here, with Westpac's press release.

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29 Comments

Aussie regulators doing great work over the ditch these last few years. Keep it up.

Are you in favor of money laundering ??, there is definitely a case to be made for the free-flow-of-money.

NOW: I feel you may be under a misconception. It's well understood by bankers that the money they earn by committing fraud is FAR MORE than the fines they receive.

Back-of-the-Envelope Calculation: For every BILLION they earn money laundering - they pay approx 125 Million in fines. This is a great business model !!

SOoo00ooo don't be fooled. The Aussie banks know this is the price of business. A Laundering Tax more than a FINE.

The $11 billion was transferred funds in breach of the regulations not Westpac's profit. Westpac's profit on those transfers would have been a lot less than $1.3 billion.

I was referring to total bank fraud annualized. I know I said laundering. It's very hard to calculate TBH. Not all fraud is caught, not all caught fraud is fined. Some fraud is fraud, BUT allowed, etc

I watched the Aussie bank hearings and follow some Australian banking news.

The regulators should distribute this money among the customers of the Bank. At least a major portion of it.

CJ099
Well, a $A1.3billion supports what I have been saying about penalties re money laundering.
Given the time to investigate and bring a prosecution this will relate to reasonably historic behaviour, so despite what you have been saying, banks in NZ will be currently being very cautious regarding money laundering and FBB breaches.
This is consistent with my experience last year when dealing with ANZ over a trust funds - very thorough demands.

Sadly it still goes on P8, As mentioned before on many occasions it has improved under Labour's leadership to push through and strengthen Anti Money Laundering regulations which were very lacking under previous government control.

And talking of other banks like ANZ, it's only a year ago that they were under the spot light too in regards to allowing money laundering. They've had to tighten up due to cases like this one: Herald article: Accused money launderers barred from ANZ after luxury cars, Remuera houses targeted by police. https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12262884

Trust fund transfers generally seem to attract far more scrutiny from our banks and probably for good reason

Very lenient given the scale of the offending, the nature of the business Westpac facilitated and competitive advantage gained. This is an organisation that has revenues of over $20bn AUD so this is only a tiny fraction of annual revenues.

they only provisioned for a 900 M fine so need to find another 400M

Probably some spare change under the couch cushions.

Easy. Just extract it from the New Zealand market. Why wouldn't you?

Share trader
Obviously Westpac understated their provision - not going to commit to a high figure when still negotiating.

Of course, Westpac doesn't pay a cent; neither do many of the executives involved in this misdoing. A couple of token 'jobs' have been sacrificed on the altar of well-compensated necessity.
Westpac customers will pay.
So anyone who banks with Westpac and is either outraged at their behaviour ( is it any different to the rest?) or who doesn't want to contribute to the transfer of money to be made from themselves to the Australian Government, should change providers.

Westpac will be given the same opportunity as any other bank to put an offer forward for my business. It will be difficult for Westpac to pass on the pain when there are lots of competitors keeping them honest (at least in respect of mortgage terms).

Most Westpac (bank) customers aren't you!
Like telcos and insurance companies etc. they rely on complacency; that customers don't shop their business about - it's all too hard and complicated. It's them that will pay.
But if Westpac does get your business, keep an eye on those little charges that will sneak onto your statement from time to time. Will it be worth changing, again, for that extra $1 transaction fee for the issue of a statement (for instance) each month? That exchange rate next time you buy something off Alibaba and it hits your account in NZ$. It all adds up ( like the guy who rounded up the Social Security cheques in the States - 1 cent off each one, every month into his account x 1 million per month. No one missed that either!)

To make it worse... the NZ government banks with Westpac. So who pays? You and me...

Serious question, how does the Govt. continue to use an organisation whose parent received the largest ever corporate fine for, among other things, facilitating child trafficking and pornography? Being the states banker is one of the largest contracts awarded to the private sector.

How many votes have been lost because the government continues to bank with Westpac?

Until that number can be counted on more than one hand it seems naive to expect politicians to actually stand for something other than re-election.

I don't see it as an election issue, more one of consistency and standards.

maybe it helps to have someone onboard that can help with negotiations when the last contract was signed
https://www.westpac.co.nz/who-we-are/about-westpac-new-zealand/our-execu...

11
up

Scumbank will be in trouble again: https://www.youtube.com/watch?v=dfkJk37qkPQ

That was a lot better than I was expecting

a good watch - thanks

Wespac got fined for contravening anti-money laundering regulations, the bank does not need to "agree".

BNZ & ASB here are also in the news recently for some things not good enough, right ?
What will RBNZ be doing ?

Depending on what it was, could also be the FMA or Commerce Commission or the banking ombudsman here.

Wonder what they'll do to extract more dividends out of the NZ operation to help cover this little foible?

Way to go Westpac! JP Morgan only fined $1 billion for their shenanigans..... who’s going to prison for fraud! Oh yes that’s right.... nobody. The bankers are above the law. Disgraceful!