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.