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Westpac blames poor judgement for money laundering breaches
Poor individual judgement has been cited as one of the reasons Westpac was alleged to have made 23 million breaches of Australia’s anti-money laundering laws.
Westpac blames poor judgement for money laundering breaches
Poor individual judgement has been cited as one of the reasons Westpac was alleged to have made 23 million breaches of Australia’s anti-money laundering laws.
The bank has now released the findings from its own investigation into its compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).
In November last year, the Australian anti-terrorism regulator filed a civil penalty order against the big four bank, alleging systemic non-compliance with the AML/CTF Act, which even saw it failing to detect known child exploitation risks.
The company board had made a commitment to make the review’s results public at its 2019 annual general meeting, with the latest update from the bank revealing a concession from Westpac that it had failed to properly adhere to AUSTRAC guidance for child exploitation risk.
This was due to deficient financial crime processes, compounded by poor individual judgements, the bank’s statement read.
In its review, Westpac identified three primary causes of the AML/CTF compliance failures:
- Some areas of anti-money laundering and counter-terrorism financing risk were not sufficiently understood within Westpac;
- There were unclear end-to-end accountabilities for managing AML/CTF compliance; and
- There was a lack of sufficient AML/CTF expertise and resourcing.
Weighing in on the findings, chairman John McFarlane said it had been his experience since joining the bank “that Westpac deeply regrets this matter”.
“Indeed, recognising the seriousness of the issues raised by AUSTRAC, the former CEO stepped down and the former chairman brought forward his retirement,” he added.
“We are all committed to fixing these issues so they don’t happen again.”
The report noted that with the benefit of hindsight, and the board’s escalation of focus on AML/CTF compliance, “directors could have recognised earlier the systemic nature of some of the financial crime issues Westpac was facing”.
According to Westpac CEO Peter King, the review looked back more than 10 years, with “appropriate” action already having been taken where wrongdoing occurred.
“Remuneration and disciplinary actions took into consideration decisions already taken and announced, the level of direct managerial responsibility or accountability for the compliance failures, and the level of culpability for failings,” he outlined.
“While the compliance failures were serious, the problems were faults of omission.”
The CEO observed “there was no evidence of intentional wrongdoing”.
Mr King’s comments come after the bank recently conceded it would likely be forced to cough up $900 million for the civil claim.
This was detailed in an announcement to shareholders that detailed a billion-dollar hit to cash earnings in 1H20.
In light of the report, and in acceptance of the review’s recommendations, Mr King recognises a need for change to take place:
“We have established a new Board Legal, Regulatory & Compliance sub-committee, appointed a deeply experienced executive to a new Executive position directly responsible for financial crime compliance, and made a number of other organisational changes,” he stated.
“We will have no tolerance for controllable negative events. Our transformation program has begun and will bring deep cultural change.”
“We completely accept that some important aspects of Westpac’s financial crime risk culture were immature and reactive, and we failed to build sufficient capacity and experience in some important areas,” Mr King added.
“We have learned from this and are absolutely committed to making amends for this event.”
Westpac has revealed it would continue to engage with AUSTRAC on the legal proceedings, after submitting its civil penalty defence and admissions on 15 May 2020.
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