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Westpac releases response plan to AUSTRAC issues

by Annie Kane6 minute read

The big four bank has released its response plan to the AML/CTF issues raised by AUSTRAC, which includes the immediate suspension of its LitePay international funds transfer system and the withholding of bonuses. 

Last week, Australia’s anti-money laundering and terrorism financing regulator, AUSTRAC, revealed that it was seeking civil penalty orders against the big four bank over 23 million alleged breaches of anti money-laundering laws.

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According to AUSTRAC, the bank failed to appropriately monitor outgoing international funds transfer instructions (IFTIs) of customers, including those which it alleges are “consistent with child exploitation typologies”. For example, one such customer reportedly transferred money to a person who was later arrested for child trafficking and child exploitation involving live streaming of child sex shows.

Both the Westpac CEO and the board have unreservedly" apologised and voiced their deep sorrow for failings by Westpac, and outlined its response plan to the issues raised.

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The board’s chairman, Lindsay Maxsted, stated: “We understand the gravity of the issues presented by AUSTRAC and reiterate our deep sorrow for failings by Westpac.

“We are determined to urgently fix these issues and lift our standards to ensure our anti-money laundering and other financial crime processes are industry-leading. As a major bank, we play a critical role in helping law enforcement agencies prevent criminals from carrying out illegal activity.”

The bank has now released its response plan to AUSTRAC’s allegations, adding that the bank “accepts responsibility for the issues that have occurred”.

Among the immediate actions taken to “ensure these issues cannot happen again”, Westpac has:

  • closed its international payments transfer service, LitePay, effective immediately;
  • closed the Westpac Australasian Cash Management product, which is at the core of Westpac’s failure to identify and report on IFTIs to AUSTRAC;
  • appointed regulatory and compliance specialists to conduct a detailed independent review of all the unreported IFTI transactions to AUSTRAC;
  • updated child exploitation filters into screening for the SWIFT payment channel to additional jurisdictions;
  • reviewed all child exploitation transaction types for the Philippines over the past 12 months, to identify and report any further suspicious transactions or customers that warrant investigation;
  • re-reviewed 12 customers highlighted by AUSTRAC in its statement of claim and taken action where appropriate; and
  • committed to adding a further 200 resources to its 750-strong financial crime team by 2020.

Other measures include establishing a dedicated board financial crime sub-committee chaired by a non-executive director to oversee the implementation of its enhanced financial crime program and commissioning an “external expert” to independently review Westpac’s program, including a review of accountability, and report back.

Moreover, the major bank said it will invest $25 million to improve “cross-border and cross-industry data sharing and analysis” and will invest a total of $34 million to various projects aimed at tackling the online sexual exploitation of children.

Mr Maxsted noted that the bank had recognised the need for uplift over the past two years and had taken steps to “substantially improve its monitoring of financial crime and other serious crime, but added: However, the allegations indicated that there are still unacceptable shortcomings in this area, and the board understands the need for action and accountability.

“We accept that we have fallen short of both our own and regulators’ standards and are determined to get all the facts and assess accountability.

“In the interim, the board has determined that either all or part of the grant of the 2019 Short Term Variable Reward will be withheld for the full executive team and several members of the general management team subject to the assessment of accountability.

“We recognise the seriousness of these events, and that is why we will appoint an external expert to provide independent oversight of the process. We will make the recommendations public.”

Mr Maxsted said Westpac is committed to implementing its initial response plan as a matter of urgency and will continue to work constructively with AUSTRAC throughout the process.

“One of our key roles is to help AUSTRAC and government to fight financial crime, and we need to have systems and controls in place to prevent our services being exploited. “We are currently working through our response to the Statement of Claim and are commencing the independent review, he said.

The board will continue to provide updates on these issues, including the findings relating to accountability.”

Westpac will meet for its annual general meeting on 12 December.

[Related: CBA admits to breaches of counterterrorism and anti-money laundering laws]

Westpac releases response plan to AUSTRAC issues
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Annie Kane

Annie Kane

AUTHOR

Annie Kane is the editor of The Adviser and Mortgage Business.

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