In what is the largest civil penalty in Australia, Westpac has been fined AU$1.3 billion (approx. $1 billion) for violation of the anti-money laundering financing and counter-terrorism Act
The company reached a settlement agreement with the Australian Transaction Reports and Analysis Centre (Austrac), for the case raised by the financial watchdog last year.
The watchdog accused the Australian bank of breaching the 2006 counter-terrorism act for more than 23 million times, including the bank’s failure to report international fund transfers above AU$11 billion. Westpac will now pay the fine as the Federal Court has accepted the penalty.
Failures on several counts
Austrac brought the case against the bank last year, revealing that it failed to follow the rules stipulated on the money-laundering act 2006 multiple times.
According to the watchdog, Austrac did not carry out due diligence on transactions in South East Asia and the Philippines, failed to keep records on the source of some of the international funds’ transfers, failed to send appropriate information to other banks regarding the funds’ transfer, did not report about 20 million international funds from more than five years coming in and out of the country.
Also, Austrac accused Westpac of failures in monitoring terrorism and money-laundering financing risks, which has put some investors and institutions in jeopardy.
The watchdog accused Westpac of failing to carry out comprehensive customer due diligence on some transactions in South East Asia and the Philippines relating to risks of child exploitation.
Westpac’s excuses not enough to reduce fine
After the accusations were read out, Westpac responded in June saying a mix of human error and technology, as well as “deficient financial crime processes” were responsible for its failure to adhere strictly to the rules.
Westpac Chief Executive Officer Peter King ruled out any wrongdoing on the company’s part, saying that the failure was a result of faults of omission.
Westpac said three main causes were responsible for the breach.
In defense of the heavy fine imposed on the bank by the court, earlier in June, Westpac pointed out three main causes of the failure to comply with AMC/CTF. According to the bank, there was insufficient resourcing and expertise, unclear end-to-end accountabilities and managing compliance, and some parts of the risks being insufficiently understood within the bank.
Biggest civil fine in Australia’s history
In preparation for the hefty fine, Westpac included more than AU$1 billion as Austrac proceedings in its half-year result in May. The expenses included AU$127 million for the response plan in addition to the potential AU$900 million penalty from the case.
Common Bank of Australia (CBA) was involved in a similar problem in 2017 when Austrac accused the bank of serious violations of the AML/CTF Act. The bank was made to pay AU$700 million for 53,750 breaches. But the penalty imposed on Austrac is the highest of its kind in Australian history.