If the Federal Court of Australia determines the penalty is appropriate, it will represent the largest ever civil penalty in Australian history.
AUSTRAC has announced an agreement to settle Westpac’s breaches of the AML/CTF Act for AUD 1.3 billion (USD 916 million), saying the penalty amount “reflects the seriousness and magnitude of compliance failings by Westpac”.
The Federal Court of Australia will now consider the proposed settlement and penalty. If it determines the proposed penalty is appropriate, the penalty order made will represent the largest ever civil penalty in Australian history.
In reaching the agreement, Westpac 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 IFTIs (international funds transfer instructions) amounting to over AUD 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.
The 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 ML/TF risks associated with correspondent banking relationships.
“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,” said AUSTRAC’s Chief Executive Officer, Nicole Rose PSM.
“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.”
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. “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.”
In a statement on Westpac’s website, chief executive Peter King apologised “sincerely” for the bank’s failings, and committed Westpac to fixing the issues to ensure its mistakes do not happen again.
The bank released the findings of its own investigation into the AML breaches in June, along with an Advisory Panel Report. “Westpac is taking action to address the areas where we have failed and are implementing all the recommendations of the Advisory Panel Report,” King said.
The bank is also working to strengthen its financial crime capability, and improving its end-to-end financial crime risk management processes. It has already established clearer accountabilities for AML/CTF compliance and made “substantial” investments to strengthen systems, processes and controls to detect and report suspicious transactions.
About 200 financial crime staff have been recruited, and a Group Executive position has been created. This position will be directly responsible for improving Westpac’s financial crim capability. The bank has also undertaken a reassessment of its culture, governance and accountability and is embarking on a multi-year programme to strengthen how it manages non-financial risk across the group
“We are determined to continually lift out financial crime standards, comply with our obligations and uphold our customer, community, and regulatory expectations,” King said.
On top of the AUD 900 million already set aside for the expected penalty in its first half 2020 results, Westpac will increase the provision in its accounts for the year ending 30 September 2020 by a further AUD 404 million , which includes AUSTRAC’s AUD 3.75 million legal costs.