Westpac Group (ASX: WBC) CEO Brian Hartzer and chairman Lindsay Maxstead will step down in the wake of legal controversy surrounding the bank.
Hatzer's resignation follows allegations from AUSTRAC that the banking group contravened the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) on more than 23 million occasions.
The corporate regulator claimed that Westpac failed to report over 19.5 million international funds transfer instructions to AUSTRAC over a period of nearly five years, and failed to carry out proper due diligence on transactions in South East Asia that have known financial hallmarks relating to potential child exploitation risks.
Hartzer will be replaced by current chief financial officer Peter King on an acting basis until Monday 2 December.
Current chief operating officer Garry Thursby will act as CFO in the interim. Long-standing director Ewen Crouch has also decided that he will not seek re-election at the upcoming Westpac AGM.
"As CEO I accept that I am ultimately accountable for everything that happens at the Bank," says Hartzer.
"And it is clear that we have fallen well short of what the community expects of us, and we expect of ourselves."
Westpac chairman Lindsay Maxsted says the resignation of Hartzer is the appropriate response in light of the AUSTRAC allegations.
"The board accepts the gravity of the issues raised by AUSTRAC," says Maxstead.
"As was appropriate, we sought feedback from all out stakeholders including shareholders and having done so it became clear that Board and management changes were in the best interest of the Bank."
King's initial role will see him implement the Westpac Response Plan that was announced on Sunday.
"We are determined to urgently fix these issues and lift our standards to ensure our anti-money laundering and other financial crime prevention processes are industry leading," says Maxstead.
"We are currently working through our response to the Statement of Claim and will shortly commence the independent review."
Hartzer will step down from his role on 2 December 2019 but has been given 12 months' notice and will be paid his fixed remuneration of $2.686 million over this period.
The bank announced a response plan on Sunday, which included a comprehensive set of actions across three areas.
This plan involves the immediate closing of LitePay, its low-cost international money transfer service, which as alleged by AUSTRAC was used by paedophiles to send money to the Philippines to buy child exploitation material.
The bank estimates the turnaround plan commitments will increase expenses by up to $80 million (pre tax) in FY20.
The situation holds similarities to Commonwealth Bank's clash with AUSTRAC, which resulted in the banking giant paying $700 million in civil penalties, the largest settlement of its kind in Australian corporate history.
The initial claim detailed how CBA failed to notify AUSTRAC of more than 53,000 transactions at its network of so-called 'intelligent' automated cash deposit machines (IDMs), with a total transaction value of $624 million.
The scandal led to Ian Narev's departure as chief executive and he was replaced in April by Matt Comyn, who says the bank did not deliberately breach the law by failing to provide the regulator with timely notification of potentially suspicious transactions.
Business News Australia
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