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Westpac hit with class action after AUSTRAC allegations

Phi Finney McDonald has commenced a class action against Westpac on behalf of  shareholders that acquired shares in the bank over the period in which AUSTRAC alleges Westpac breached AML/CTF laws.

In the latest of a string of class actions being lodged against the major banks following the banking royal commission and subsequent regulatory action, class action law firm Phi Finney McDonald has commenced civil proceedings against Westpac on behalf of certain shareholders.

The class action, commenced in the Federal Court of Australia against ASX-listed Westpac Banking Corp, is being brought on behalf of investors who acquired shares on the Australian Securities Exchange and the New Zealand Stock Exchange – as well as American Depository Receipts traded on the New York Stock Exchange – between 16 December 2013 to 19 November 2019 (inclusive).

What the Phi Finney McDonald class action entails

The claim relates to market disclosure connected to Westpac’s monitoring of financial crime and matters that are the subject of the recent AUSTRAC civil penalty orders and relate to alleged “systemic non-compliance” with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).

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The Australian Transaction Reports and Analysis Centre (AUSTRAC) has alleged that Westpac contravened the act on over 23 million occasions.

The case has already seen several Westpac executives step down from the bank, including former CEO Brian Hartzer, and a response plan put in place.

Phi Finney McDonald particularly noted that the AUSTRAC case identifies failures to: 

  • conduct risk proscribed assessments of correspondent bank relationships to identify money laundering and crime financing (AML/CTF) risk; 
  • report to AUSTRAC approximately 19.5 million international funds transfer instructions (IFTI) necessary for agencies to scrutinise and identify AML/CTF conduct; 
  • pass on to other entities in funds transfer chains origin data for their own review purposes; 
  • adopt and maintain an appropriate program to address AML/CTF risk; 
  • record for seven years records of certain foreign transactions and monitor customers (including those potentially engaging in child exploitation); and 
  • apply enhanced due diligence where warranted by AML/CTF risk.

The class action specialists highlighted that, after the AUSTRAC case was announced on 20 November, the market responded.

According to Phi Finney McDonald, between the close of trade on 19 November 2019 and the close of trade on 22 November 2019, Westpac’s share price on the ASX fell by approximately 7 per cent.

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As such, the litigators are alleging that Westpac breached its continuous disclosure obligations by failing to inform investors that:

  • Westpac had “systemic faults and failures” in identifying AML/CTF risk and there was “serious and systemic non-compliance” with the AML/CTF Act;
  • Westpac’s “serious non-compliance” with its AML/CTF obligations included the “failure to monitor certain customers transacting on accounts in a manner generally accepted to be indicative of child exploitation typologies”; and
  • Westpac was potentially exposed to enforcement action by AUSTRAC in respect of its “serious and systemic non-compliance” with the AML/CTF Act, which might result in Westpac being ordered to pay a substantial civil penalty.

It is also alleged that Westpac engaged in “misleading and deceptive conduct” by representing to the market that Westpac:

  • had effective policies, procedures and systems in place for ensuring compliance with the AML/CTF law, and that it was in compliance with that law;
  • to the extent it had identified improvements required for compliance with AML/CTF law, this was not due to systemic flaws or deficiencies by Westpac, and it had publicly disclosed all matters relating to the IFTI failures relevant to any AUSTRAC action; and
  • had policies, procedures and systems in place to ensure material matters were notified to the ASX and NZX, and that it had complied with its continuous disclosure obligations.

Phi Finney McDonald has therefore brought a class action on behalf of investors who acquired shares in Westpac between 16 December 2013 to 19 November 2019, alleging that Westpac’s share price was artificially inflated because of the lack of disclosure relating to the above conduct. 

The claim does not identify the amount of any damages sought.

The class action is being funded by Woodsford Litigation Funding (Woodsford).

Westpac has confirmed that it had been served with a class action filed by law firm Phi Finney McDonald, adding that it would be “defending the claims”. 

The latest in a line of proceedings

The Phi Finney McDonald class action is the latest in a string of court cases facing the major bank.

Westpac is also facing several other class actions, such as the Slater and Gordon class action on behalf of superannuation members who were allegedly short-changed by the bank’s super funds, another relating to the alleged mis-selling of consumer credit insurance, and a Maurice Blackburn class action that alleges breaches of responsible lending obligations under the Consumer Credit Protection Act.

This week, it was also announced that APRA has launched an investigation into Westpac to identify possible breaches of the Banking Act, while also requiring the bank to hold an additional $500 million in capital.

According to APRA, the investigation will examine whether Westpac, its directors and/or its senior managers breached the Banking Act – including the Banking Executive Accountability Regime (BEAR) – or contravened APRA’s prudential standards.

APRA claimed that it is aiming to “ensure that fundamental deficiencies in Westpac’s risk management framework are identified and addressed” and that Westpac and those responsible are “held accountable as appropriate”.

[Related: APRA launches probe into major bank]

Westpac hit with class action after AUSTRAC allegations
Westpac hit with class action
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Annie Kane

Annie Kane is the editor of The Adviser and Mortgage Business.

As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts. 

Contact Annie at: This email address is being protected from spambots. You need JavaScript enabled to view it.

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