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Westpac Group has announced that it has reached an agreement with financial crimes regulator AUSTRAC to settle civil proceedings launched in the Federal Court of Australia on 20 November 2019.
As part of the settlement, Westpac has agreed to file a Statement of Agreed Facts and Admissions, which incur a penalty of $1.3 billion, subject to Federal Court approval.
Westpac has previously admitted to over 23 million contraventions of the Anti-Money Laundering and Counter-Terrorism and Financing Act 2006 (AML/CTF Act). However, as part of the settlement, the major bank has admitted to additional 76,000 breaches set out in a revised statement of claim.
Specifically, Westpac has admitted to failing to:
- properly report over 19.5 million International Funds Transfer Instructions (IFTIs) amounting to over $11 billion 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; and
- carry out appropriate customer due diligence in relation to suspicious transactions associated with possible child exploitation.
If approved by the Federal Court, the $1.3-billion charge would represent the largest civil penalty in Australian history, surpassing the $700-million settlement reached between AUSTRAC and the Commonwealth Bank of Australia.
“I would like to apologise sincerely for the bank’s failings,” Westpac Group CEO Peter King said.
“We are committed to fixing the issues to ensure that these mistakes do not happen again. This has been my number one priority. We have also closed down relevant products and reported all relevant historical transactions.
“This agreement is an important step in the court process. It provides more certainty to all our stakeholders as we continue to implement the measures in our response plan and complete the implementation of recommendations from the reviews that have been conducted.”
AUSTRAC CEO Nicole Rose PSM said the settlement “sends a strong message” to the broader industry.
“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,” Ms Rose said.
“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.”
Ms Rose added that the scale of Westpac’s breaches, which spanned over several years, was “unacceptable” and avoidable had the proper assurance and oversight processes been in place.
“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,” she said.
The settlement comes just months after Westpac released findings from its investigation into its AML/CTF compliance issues as well as the Advisory Panel Report on governance and accountability.
The independent review found that key elements of Westpac’s non-financial risk culture are “immature and reactive”.
“Westpac is taking action to address the areas where we have failed and are implementing all the recommendations of the Advisory Panel Report,” Mr King said.
“We are strengthening our financial crime capability. We acknowledge the important role Westpac must play in protecting the integrity of the financial system.
“As part of this process, we are improving our end-to-end financial crime risk management processes and have established clearer accountabilities for AML/CTF compliance.”
The $1.3 billion penalty is well beyond the major bank’s estimate of $900 million, outlined in the group’s first half results for the 2020 financial year.
Commonwealth Attorney-General Christian Porter said the proposed penalty “reflected the significant and systematic nature” of the breaches.
“While noting the penalty is still subject to the Federal Court’s approval, this should serve as a wake-up call to all financial institutions operating in Australia that the government is serious about maintaining a strong financial system and won’t tolerate serious non-compliance,” Mr Porter said.
Minister for Home Affairs Peter Dutton added the agreement is further proof that the government is “serious about ensuring the integrity of Australia’s financial system” and “protecting the community from crime”.
“Banks have a responsibility to not let criminal activity go undetected and to protect Australians from serious and organised crime like child exploitation, drug trafficking and fraud,” Minister Dutton said.
“They should be able to trust their banks and financial services they use daily to have strong systems in place to protect the community from crime. In this case, Westpac breached that trust and let their customers down, ultimately putting Australians at risk.”