Westpac Bank violated anti-money laundering law
Australian Financial Crime Service accuses Westpac Banking Corp of 23 million violations of anti-money laundering and terrorist financing laws.
The Australian Center for Transaction Reporting and Analysis (Austrac) says each violation carries a maximum fine of A $ 21 million ($ 11.5 million).
Most of the violations relate to the inability to report international transfers to Austrac in a timely manner.
Westpac is believed to have failed to properly report more than 19.5 million international money transfers between 2013 and 2018.
Austrac CEO Nicole Rose said Westpac’s failure to properly report transfers undermined «the integrity of the Australian financial system» and «interfered with the ability to trace the origin of financial transactions when needed to support police investigations».
Austrac estimates over $ 11 billion in unregistered deals in up to six years.
The bank also allegedly failed to maintain records and perform certain functions with due diligence when dealing with potentially risky foreign banks..
All of these banks have disclosed their relationships with high-risk or sanctioned countries, including Iraq, Ukraine and Zimbabwe..
«The risk associated with Westpac was that these high-risk or sanctioned countries could access the Australian payment system through nested mechanisms, without Westpac’s knowledge.», – Austrac said in a statement.
The agency also reported that there were a small number of transactions in the accounts that were potentially associated with «risks of child exploitation».
Westpac allegedly failed to implement the required automated procedures to detect these transactions.
Austrac said in a statement that Westpac has known since 2013 about «increased child exploitation risks associated with clients who made frequent small payments to the Philippines and Southeast Asia». The Bank did not exercise due diligence in relation to 12 clients who had frequent low-value transactions over several years, which suggests their involvement in the exploitation of child labor.
One client, who was serving a prison sentence for child exploitation, set up multiple Westpac accounts. Austrac reports that Westpac found suspicious activity on one account, but did not verify other accounts that were used to send payments to the Philippines.
Westpac shares plunge 3.3% in Sydney trading.
Westpac CEO Brian Hartzer said the problems «should have been identified and eliminated earlier».
«It is disappointing that we have not met our own standards and regulatory expectations and requirements», – said in a statement.
The bank said it independently reported potential violations to Austrac, and previously reported the investigation to shareholders in its annual results..
Westpac rival Commonwealth Bank paid a $ 700 million fine for similar violations last year.
The country’s banking sector has also been targeted by the Royal Commission – the highest form of public inquiry in Australia – which earlier this year exposed widespread wrongdoing in the industry..
Austrac declined to comment to Reuters if it was conducting similar investigations against two other so-called Australian banks. «Big four» – National Australia Bank (NAB) and Australia and New Zealand Banking Group (ANZ).
ANZ declined to comment, while NAB sent a statement to Reuters on November 7 that the bank had reported an unspecified number of violations in Austrac and was working with the regulator..
The Reserve Bank of New Zealand, which performs functions similar to Austrac in New Zealand, said it is in close contact with the Australian agency regarding Westpac. Westpac is one of New Zealand’s largest lenders.
«Obviously, this is terrible and sad, ”Australian Prime Minister Scott Morrison told reporters in Brisbane when asked about the Westpac lawsuit. – This is a pretty dire accusation regarding some of the processes and procedures they had».