Westpac to pay $1.26b over money-laundering breaches

Fine is equal to bank's first-half cash profit and the largest levied against an Aussie firm

SYDNEY • Westpac Banking 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 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 yesterday. These included failing to monitor customers for transactions related to possible child abuse or conduct 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 Mr Hartzer's resignation and the early retirement of Mr 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 that years of transactions handled by the world's largest banks were 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 chief executive 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 performer among 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.

Chief executive Peter King again 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.

"This has been my No. 1 priority. We have also closed down relevant products and reported all relevant historical transactions."

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A version of this article appeared in the print edition of The Straits Times on September 25, 2020, with the headline Westpac to pay $1.26b over money-laundering breaches. Subscribe