Westpac pays record $1.26 billion to settle money-laundering suit

Westpac shares fell as much as 2.4 per cent in early Sydney trade.
Westpac shares fell as much as 2.4 per cent in early Sydney trade.PHOTO: REUTERS

SYDNEY (BLOOMBERG) - Westpac Banking Corp will pay a record A$1.3 billion (S$1.26 billion) fine to settle Australia's biggest breach of anti-money laundering laws, capping a saga that shredded the bank's reputation and cost former chief executive officer Brian Hartzer his job.

The fine, the largest levied against an Australian company, is more than the A$900 million Westpac had set aside for a potential penalty, and almost double the A$700 million that rival Commonwealth Bank of Australia paid to settle its own money-laundering breaches in 2018.

In reaching the agreement, Westpac admitted to about 76,000 additional breaches on top of the 23 million contraventions in the original suit, the financial crimes agency said in a statement on Thursday (Sept 24). These included failing to monitor customers for transactions related to possible child abuse, or conducting adequate risk assessment of overseas banks.

The settlement closes a sorry 10-month chapter in the history of Australia's oldest bank. In the immediate aftermath of the suit, intense investor pressure led to Hartzer's resignation and the early retirement of Lindsay Maxsted as chairman. An investigation excoriated the lender for an "immature and reactive" risk culture, and found staff lacked the skills, expertise and experience to effectively manage risk.

The agreement comes with the global financial industry again falling under the spotlight after a cache of leaked documents showed years of transactions handled by the world's largest banks linked to money laundering, corruption and fraud.

Westpac's settlement "sends a strong message that Austrac will take action to ensure our financial system remains strong so it can't be exploited by criminals," the financial crimes regulator's CEO Nicole Rose said in a statement. "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."

Westpac shares fell as much as 2.4 per cent in early Sydney trade. The stock is down 34 per cent this year, making it the worst performing of Australia's big four banks.

The fine is equal to the bank's first-half cash profit. It will take a further A$404 million provision to account for the higher penalty, and pay Austrac's legal costs of A$3.75 million.

CEO Peter King again apologized 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. "This has been my number one priority. We have also closed down relevant products and reported all relevant historical transactions."