BOQ vows to lift its game after agreeing to enforceable undertakings with AUSTRAC and APRA

BOQ vows to lift its game after agreeing to enforceable undertakings with AUSTRAC and APRA

Photo: BOQ Carindale, via Facebook.

Bank of Queensland (ASX: BOQ) has vowed to bolster its risk management practices after agreeing to enter an enforceable undertaking sought by Australia’s financial crime watchdog AUSTRAC.

The move follows a six-month investigation stemming from a compliance inspection by AUSTRAC that uncovered deficiencies in the group’s systems and controls to meet Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) laws.

The enforceable undertaking, which was voluntarily entered by BOQ, comes in tandem with a separate investigation into the group by banking industry regulator, the Australian Prudential Regulation Authority (APRA).

BOQ reveals it also has entered into a voluntary enforceable undertaking with APRA to address ‘weaknesses’ in its risk management practices, controls, systems, governance and risk culture.

As part of the undertaking, BOQ has agreed to top up its operational risk capital requirement by $50 million, although the company says it may apply to remove all or part of the capital adjustment once it meets APRA’s compliance requirements.

Following AUSTRAC’s investigation, BOQ is also required to appoint an external auditor to report back to the financial crime regulator.

AUSTRAC has revealed that both regulators have kept each other abreast of their separate investigations throughout the process.

“The actions undertaken by AUSTRAC and APRA in relation to BOQ highlight whole-of-government efforts to maintain the integrity of Australia’s financial systems,” AUSTRAC CEO Nicole Rose says.

“Businesses which do not have a strong AML/CTF program in place are vulnerable to exploitation by criminals, which is why AUSTRAC has been working with BOQ to harden their processes.

“I am pleased with BOQ’s cooperation over the past six months, and their commitment to taking remedial action to ensure they meet their obligations under the AML/CTF Act.”

BOQ chairman Warwick Negus says the group acknowledges the concerns raised by APRA and AUSTRAC.

“BOQ remains committed to its multi-year Integrated Risk Program to build a stronger and simpler bank with an uplift in risk culture, frameworks, processes and controls,” Negus says.

“This program will be independently reviewed as previously announced and we will continue to work proactively and transparently with APRA and AUSTRAC.

“Our digital transformation is complementary to this strategic priority as we decommission multiple complex legacy systems and reduce our reliance on manual processes."

BOQ’s Integrated Risk Program was announced on 14 April this year, with the company revealing today that it has made ‘good progress’ in strengthening its financial resilience and that it ‘holds strong capital and liquidity buffers’.

The enforceable undertaking with APRA requires BOQ to prepare a remedial action plan to address ‘underlying weaknesses in risk management practices, controls, systems, governance and risk culture'.

BOQ is also required to appoint an independent reviewer approved by APRA to report on the merits and progress of the plan which is required to be submitted within 120 days.

BOQ shares were down 3.98 per cent at $5.55 in early trading this morning.

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