Westpac leadership fronts disgruntled shareholders

Westpac has held its annual general meeting (AGM), in which its shareholders were invited to voice their concerns about the group’s failure to detect alleged breaches of anti-money laundering laws.

Last month, AUSTRAC revealed that it was seeking civil penalty orders against the big four bank over 23 million alleged breaches of anti-money laundering laws.

According to the regulator, the bank failed to appropriately monitor outgoing international funds transfer instructions of customers, including those which it alleged are “consistent with child exploitation typologies”.

One of the more damning examples in AUSTRAC’s Statement of Claim is the assertion that one such customer transferred money to a person located in the Philippines who was later arrested in November 2015 for child trafficking and child exploitation involving live streaming of child sex shows.

The revelations sparked the resignation of former Westpac CEO Brian Hartzer and long-serving board director Ewen Crouch, and the bringing forward of chairman Lindsay Maxsted’s retirement.

Former chief financial officer Peter King was appointed to serve as interim CEO while the bank searches for a permanent replacement for Mr Hartzer.

‘We’ve let you down’

Outgoing chairman Lindsay Maxsted opened his address to shareholders at the group’s AGM by apologising on behalf of the board for Westpac’s shortcomings.

“Let me say up front that your board is deeply distressed about the issues raised by AUSTRAC in its Statement of Claim of 20 November 2019,” he said.

“In particular, as a board and as individuals, we are devastated that anyone may have been exposed to the risk of harm as a result of a failing by Westpac.

“For this, we are truly sorry. Every one of us in this company has been shaken by the events of the past few weeks and we know this feeling is shared widely throughout the community, and in this room.”

Interim CEO Peter King echoed Mr Maxsted’s remarks, adding that he is “personally devastated” by the revelations.

“That a mistake by Westpac may have exposed anyone, particularly children, to the risk of harm is distressing for all of us,” he said.

“By falling short of expectations, we have let down customers, shareholders, the community and our people.

“For this, I add my personal apology to anyone who may have been affected.”

Mr King added: “We have a significant task ahead of us, but I chose to accept this job because I love this company. We must put this right, and we will.”

Both the chairman and interim CEO also sought to reassure shareholders of the strength of the bank’s underlying position in the marketplace.  

“The board is acutely aware of the impact of recent events on Westpac. But your company remains strong, we are well capitalised, our funding and liquidity is sound, and asset quality is strong,” Mr Maxsted said.

“Our franchise is also in good shape with a highly committed workforce dedicated to supporting customers.”

Mr King added that he expects operating conditions to remain “soft” in the coming year due to subdued growth, low interest rates and “ongoing regulatory intensity”, but said he is confident in the bank’s ability to navigate through such headwinds.

“While this environment will continue to drag on performance in the 2020 year, we should see some balance sheet growth without a significant deterioration in credit quality,” he said.

However, the interim CEO acknowledged that there will be “extra costs” as it manages regulatory issues.

“I don’t underestimate the size of the task ahead,” he said.

[Related: AUSTRAC scandal costs Westpac millions in capital]