Australia’s Westpac Banking Corp faces a massive fine after being accused by regulators yesterday of “serious and systemic” breaches of money-laundering laws involving more than US$7 billion.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) said it had taken legal action against Westpac for failing to report more than 19.5 million international fund transfers, including “high-risk transactions” to Southeast Asian nations potentially linked to child exploitation.
Overall, AUSTRAC chief executive officer Nicole Rose said, Westpac violated the anti-money laundering and counter-terrorism financing act 23 million times.
She did not comment on the amount of a potential penalty for Australia’s second-biggest bank, saying it was a matter for the courts.
However, in its submission to the Federal Court of Australia, AUSTRAC said that each of the 23 million breaches attracts a civil penalty “between A$17 million and A$21 million [US$11.6 million to US$14.3 million]” — theoretically putting the bank on the hook for up to A$483 trillion in fines.
Australia’s largest lender, the Commonwealth Bank of Australia (CBA), last year faced a theoretical maximum fine of A$1 trillion after AUSTRAC found it had failed to report on 53,500 transactions, a small portion of the alleged breaches by Westpac.
The CBA ended up negotiating an A$700 million settlement.
Among the most damaging allegations, the regulator accused Westpac executives of “indifference” to clear evidence that some international transfers were used to fund child exploitation.
“Since at least 2013, Westpac was aware of the heightened child exploitation risks associated with frequent low-value payments to the Philippines and Southeast Asia, both from AUSTRAC guidance and its own risk assessments,” it said.
The regulator added that senior Westpac management was “specifically briefed” in June 2016 on these risks with respect to one of its money transfer channels.
In response to the charges, Westpac’s American-born chief executive officer Brian Hartzer insisted bank executives have “absolutely not been indifferent” to the issue.
He later held a conference call saying he was personally “disgusted” by the subject of some allegations, but declined to say whether he would resign.
Hartzer also said many of the transfers cited by AUSTRAC as unreported were “recurring, low-value payments” from foreign government pension funds to people living in Australia.
Australian Prime Minister Scott Morrison, who leads a conservative, pro-business government, said he was “appalled” by the allegations against Westpac and said Australia’s banks need to “lift their game.”
Rose told a news conference that Westpac’s failures “resulted in serious and systemic non-compliance” with anti-money laundering and counter-terrorism financing laws.
She said the unreported transactions amounted to more than A$11 billion from 2013 to last year.
The AUSTRAC action added to a host of problems challenging Australia’s banking industry, one of the world’s most profitable.
The country’s four biggest banks — CBA, Westpac, National Australia Bank (NAB) and Australia and New Zealand Banking Group Ltd — were the target of a royal commission of inquiry that early this year exposed rampant malpractice across the sector.
It found banks had charged fees to dead people and for no services at all, used aggressive selling tactics and provided poor advice that led to significant financial upheaval for clients.
In the latest such development, NAB yesterday agreed to a A$49.5 million settlement of a class-action suit for tens of thousands of customers who were sold junk credit card and personal loan insurance, the law firm that led the suit said.
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