Westpac filed a defence on 15 May in response to AUSTRAC’s statement of claim, admitting to the non-reporting of IFTIs and associated tracing information failures; record-keeping failures; ongoing customer due diligence failures; and failures regarding correspondent banking obligations.
“Westpac and AUSTRAC continue to engage constructively and are discussing a statement of agreed facts and admissions,” the bank said in a statement. “Westpac acknowledges that financial crime is a serious threat to society and is determined to continue to lift its standards and meet its anti-money laundering and other financial crime obligations.”
But the bank said that it did perform some level of due diligence on the 12 customers who made transactions consistent with child exploitation and said that the vast majority of its international transfers were correctly reported. It also hit back at AUSTRAC for giving its compliance a thumbs up in 2016 and said that it performed risk assessments on correspondent banks.
It’s essentially a defence against the most controversial accusations that AUSTRAC made: that Westpac’s upper echelons didn’t care about the problem.
“These contraventions are the result of systemic failures in its control environment, indifference by senior management and inadequate oversight by the board,” AUSTRAC said in its statement of claim. “They stemmed from Westpac’s failure to properly resource the AML/CTF function, to invest in appropriate IT systems and automated solutions and to remediate known compliance issues in a timely manner. They have occurred because Westpac adopted an ad hoc approach to ML/TF risk management and compliance.”
While the question of indifference was the hill that former CEO Brian Hartzer chose to die on (and die he did, after being caught saying that the allegations weren’t “a major issue” for Australians) new CEO Peter King’s crusade to turn the bank’s culture around suggests some interior acknowledgement that AUSTRAC’s claim wasn’t necessarily far from the truth.
“In addition to closing relevant products and recruiting an additional 200 people in financial crime and compliance, I am putting in place a clearer accountability regime that will speed up decision-making, improve implementation and more clearly define responsibility and its associated risk management,” Mr King said in April.
Westpac has provisioned $900 million for the payment of its AUSTRAC penalty – $200 million more than CBA and about $600 million less than most analysts anticipate AUSTRAC will try and take them for. Given that nothing Westpac is doing is consistent with rolling over and dying – and the fact that a date for the filing of a statement of agreed facts has lapsed – it seems that the matter could well play out in court.
A Westpac spokesperson declined to comment.
