Australian banking giant Westpac faces significant fines after being accused by regulators Wednesday of “serious and systemic” breaches of money-laundering laws involving more than seven billion US dollars.
Australia’s financial intelligence agency, AUSTRAC, said it had taken legal action against Westpac for its failure to report more than 19.5 million international fund transfers, including “high-risk transactions” to Southeast Asian nations potentially linked to child exploitation.
AUSTRAC chief Nicole Rose, in announcing the action, did not comment on the amount of a potential penalty, saying it was a matter for the courts.
Westpac said earlier this month in its latest annual report that it had informed AUSTRAC of its failure to properly report a “large number” of international transfers and warned the bank could be subject to a “significant financial penalty” for the breaches.
In a statement Tuesday, Westpac said it was “currently reviewing AUSTRAC’s statement” and would “issue a further statement” to markets.
Prime Minister Scott Morrison said he was “appalled” and said Australia’s banks need to “lift their game”.
Australia’s largest lender, the Commonwealth Bank (CBA), paid a 700 million Australian dollar fine in 2018 after AUSTRAC found it had failed to report on 53,500 transactions, a small portion of the alleged breaches by Westpac.
Rose told a press conference that Westpac’s failures “resulted in serious and systemic non-compliance” with anti-money laundering and counter-terrorism financing laws.
She said the unreported transactions amounted to more than AUS$11 billion (US$7 billion) over five years, from 2013 to 2018.
Westpac “failed to appropriately assess and monitor the ongoing money-laundering and terrorism financing risks associated with the movement of money into and out of Australia through correspondent banking relationships,” she said.
“This resulted in a significant loss of intelligence to AUSTRAC and our national security and law enforcement partners,” she added.
Rose said the breaches involved more than 19.5 million transactions, including “high-risk transactions to the Philippines and South East Asia concerning known financial indicators relating to potential child exploitation risks”.
The AUSTRAC action added to a host of problems challenging Australia’s banking industry, one of the world’s most profitable.
The country’s four biggest banks — CBA, Westpac, National Australia Bank and ANZ — were the target of a royal commission of inquiry that early this year exposed rampant malpractice across the sector.
It found banks had charged fees to dead people and for no services at all, used aggressive selling tactics and provided poor advice that led to significant financial upheaval for clients.
All the banks have reported significant hits to profits as they reimburse hundreds of millions of dollars to wronged customers.