Westpac has agreed to pay a record $1.3 billion fine for breaches of money laundering and terrorism financing laws.
It will be the largest civil penalty in Australian history.
Attorney-General Christian Porter said the massive fine should serve as a wake-up call for the banking industry.
The bank has admitted to breaking international fund transfer laws 23 million times, leaving the country’s financial system exposed to criminal exploitation.
Some suspicious transactions that slipped under the radar related to possible child exploitation.
Westpac chief executive Peter King has apologised for the bank’s failings.
“We are committed to fixing the issues to ensure that these mistakes do not happen again,” he said in a statement on Thursday.
“We have also closed down relevant products and reported all relevant historical transactions.”
Westpac failed to report more than 19.5 million international fund transfers worth more than $11 billion to Australia’s financial crime agency.
The laws are in place to guard against exploitation by terrorists, paedophiles and organised criminals.
AUSTRAC chief executive Nicole Rose said such a large number of breaches over several years was unacceptable and could have been avoided with better oversight.
She hopes the settlement sends a strong message to other lenders.
“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 failed to pass on information about the origin of some transfers and the source of funds to other banks in the transfer chain, leaving those lenders exposed.
It did not keep proper records or appropriately assess and monitor the risks associated with moving money in and out of Australia from high-risk jurisdictions.
Nor did the bank carry out appropriate customer due diligence in relation to suspicious transactions linked to possible child exploitation.