Westpac board could be disqualified over alleged breaches, Josh Frydenberg says

Treasurer says the banking regulator will examine whether board should be removed over transactions allegedly linked to child exploitation

The treasurer, Josh Frydenberg, says the banking regulator is looking at disqualifying the Westpac board for accountability failings which may have helped facilitate child exploitation.

The financial intelligence agency, Austrac, announced it had begun legal action against Westpac last week, levelling accusations the bank had more than 23m legal breaches in relation to its obligations under anti-money and counterterror finance laws.

Among those accusations was that the bank failed to stop payments from Westpac customers to people in the Philippines, which Austrac said should have been detected and stopped given the consistency of the payments with child exploitation.

One customer had been convicted of child exploitation but was alleged to have not been monitored. Another paid someone who was later charged with “live streaming of child sex shows and offering children for sex”.

The bank’s board has expressed it’s “deep distress” at the “notion that any child has been hurt by any failings by Westpac” but so far has resisted pressure to step down.

The bank’s boss, Brian Hartzer, has also indicated he will continue at the helm.

Both sides of politics have maintained it is for the bank’s board and shareholders to dictate the bank’s future. But speaking to ABC’s Insider’s program, Frydenberg said the bank regulator was looking at triggering mechanisms which could take the decision out of their hands.

“Where boards start is not necessarily where boards finish,” Frydenberg said.

“Now, Apra has the ability – under the banking executive accountability regime – to disqualify boards and to disqualify executives where there’s a failure to appropriately enforce and uphold the duties under the legislation.

“That legislation came into force in 2018. It’s not retrospective, and some of those alleged breaches date back to 2013. But the anti-money-laundering laws are a proscribed activity under Apra, and I know Apra are looking at it.”

Frydenberg said he would not interfere with the process, but was aware it was under way.

“Apra is an independent entity, like Austrac, and they will determine their own conclusions,” he said.

“But I will say that they are looking at it and obviously they have particular powers under that legislation that we introduced.”

The government and Labor are reluctant to push the bank in any one direction as politicians seek to find a line between holding the big banks accountable and protecting Australia’s financial markets and consumer confidence.

The prime minister, Scott Morrison, said he was “appalled” and that banks needed to “lift their game” but that it showed Australia’s banking watchdogs were doing their jobs.

Frydenberg said the matter of consequences rightly sat with independent bodies.

“Our position has consistently been – decisions about who are on boards are matters for shareholders and who are on executive teams are matters for boards,” he said.

“That being said, these are very serious issues. There must be accountability. Austrac have been highly critical in their statement. And now Apra is looking into it. So I don’t think there’s any doubt as to the seriousness of these issues and the government’s position.”

Apra also has the power to fine banks for its failings and can apply to the courts to issue fines of up to $500m.

The Westpac news came just months after the banking royal commission revealed systemic failings within Australia’s leading financial institutions, leading to questions over what consequences individuals in charge of the organisations face.

Frydenberg said it was too early to conclude whether or not anyone would lose their job over the Westpac news, but indicated he expected action at the bank’s annual general meeting later this week.

“They’ve got an AGM on December 12,” he said. “There’ll be some tough conversations between now and then. The board, management, they’re all seized on this issue and they’re now going through a process. But with Apra providing additional focus, as well as Austrac, certainly the heat is on the company.”


Amy Remeikis

The GuardianTramp

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