Westpac to pay record $1.3bn fine after money laundering and child exploitation investigation

Australian bank is accused of breaching laws more than 23m times including allowing customer transfers consistent with child exploitation

Westpac has agreed to pay a record penalty of $1.3bn to settle legal action over money laundering and child exploitation allegations levelled against it by the financial intelligence agency, Austrac.

The $1.3bn figure is $400m more than the $900m the bank had previously set aside as an estimate of the penalty it would have to pay and comes after the bank said an additional 250 customers made transactions consistent with child exploitation – a dramatic increase on the 12 over which the regulator originally took action.

In a further concession to Austrac, Westpac has also agreed to additional contraventions of anti-money laundering and counter-terror finance laws, the company told the stock exchange on Thursday.

The deal between the bank and the regulator is subject to approval by the federal court.

In November last year, Austrac launched federal court action accusing Westpac of breaching AML-CTF laws more than 23m times, including by allowing a dozen customers to transfer money to the Philippines in a way consistent with child exploitation.

But in a statement of agreed facts, to be filed with the court, Westpac said that in December last year it “completed a review of all child exploitation transaction types for the Philippines, south-east Asia and Mexico over the prior three year period”.

As a result, it discovered an additional 248 customers who had been making payments in a way consistent with child exploitation, and reported them to Austrac.

In addition, Westpac said it had been banking two customers convicted of child exploitation offences who made suspicious transactions.

“Had Westpac conducted appropriate ongoing customer due diligence with respect to customers 261 and 262, these child exploitation related suspicions could have been identified earlier,” the bank said in the statement of agreed facts.

Most of Austrac’s allegations related to its dealings with correspondent banks, which it failed to properly monitor.

However, the child exploitation allegations drew the most public attention.

The scandal sparked shareholder fury and forced chief executive Brian Hartzer and chairman Lindsay Maxsted to resign.

Westpac formally admitted it broke the law in May, opening the way to a settlement, although it still denied some of the allegations.

And in July it said it may have committed an additional 450,000 breaches of the law.

On Thursday, Westpac’s new chief executive, Peter King, issued the latest in a series of apologies made by the bank.

“We are committed to fixing the issues to ensure that these mistakes do not happen again,” he said.

“This has been my number one priority. We have also closed down relevant products and reported all relevant historical transactions.”

Austrac chief executive Nicole Rose said the proposed penalty “reflects the serious and systemic nature of Westpac’s non-compliance”.

“Westpac’s failure to implement effective transaction monitoring programs, and its failure to submit IFTI [international funds transfer instruction] reports to Austrac and apply enhanced customer due diligence in relation to suspicious transactions, meant Austrac and law enforcement were missing critical intelligence to support police investigations.”


Ben Butler

The GuardianTramp

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