Westpac Group has published a reassessment report from global consultancy firm Promontory, which includes findings from a review into the bank’s culture, governance and accountability remediation plan (CGA).
The review was commissioned in November 2019 after financial crime watchdog AUSTRAC launched an investigation into Westpac’s alleged breaches of anti-money laundering and counter-terrorism financing laws.
The independent review has found that key elements of Westpac’s non-financial risk culture are “immature and reactive”.
According to Promontory, Westpac’s “overly complex” risk culture resulted in “confusion around accountability and challenges in execution”.
These shortcomings were found to have been identified by each of the bank’s “three lines of defence”, demonstrating that further change was required to “address identified weaknesses”.
Reflecting on the findings, Westpac Group CEO Peter King conceded that there were gaps in the bank’s management structure.
“Our reassessment confirms that our management of non-financial risk is currently not at the standard we set for ourselves,” he said.
“It is clear we have more to do to address these shortcomings, including improving our risk management capability and risk culture, which is not where we want it to be.”
Mr King added that in light of such findings, Westpac has launched a “comprehensive, multiyear program”, referred to as Customer Outcomes and Risk Excellence (CORE), which seeks to address shortcomings.
“The program is a company priority, and as CEO I’m accountable for its delivery,” Mr King said.
According to Westpac, the CORE program has three key objectives, which include:
- initiatives that set clear direction and tone from leadership to promote a proactive risk culture;
- simplifying risk management frameworks and increasing capability and resources in the risk function; and
- providing additional training and support for employees to help them understand they all have a role in managing risk and driving clearer accountability and decision making.
Westpac stated that it has already commenced the program, with several initiatives underway, including:
- establishing a new Board Legal, Regulatory and Compliance Committee;
- creating a new group executive role for financial crime, compliance and conduct to drive more focus on these areas;
- greater focus on banking businesses in Australia and New Zealand to simplify operations and reduce risk;
- implementing a new line of business operating structure that will clarify responsibilities and improve accountability across the organisation; and
- enhancing capability across three lines of defence, including appointing an additional 240 experts across its risk and compliance functions.
“This program is comprehensive, and where we find any new issues, they will be dealt with promptly and as efficiently as possible,” Mr King concluded.