Westpac to pay largest ever civil penalty of $1.3 billion over anti-money laundering law breaches

Westpac to pay largest ever civil penalty of $1.3 billion over anti-money laundering law breaches

Westpac Group (ASX: WBC) will pay $1.3 billion in penalties after admitting to breaching anti-money laundering and counter-terrorism laws on more than 23 million occasions.

The penalty, if deemed appropriate by the Federal Court, will be the largest ever civil penalty in Australian legal history following proceedings brought by AUSTRAC.

The bank admitted to a number of failures, including not reporting more than 19.5 million International Funds Transfer Instructions (IFTIs) amounting to over $11 billion to AUSTRAC.

Further, Westpac has admitted to failing to properly carry out customer due diligence in relation to suspicious transactions associated with possible child exploitation.

Westpac CEO Peter King has apologised for the bank's failings today.

"We are committed to fixing the issues to ensure that these mistakes do not happen again," said King.

"We have also closed down relevant products and reported all relevant historical transactions.

"This agreement is an important step in the court process. It provides more certainty to all our stakeholders as we continue to implement the measures in our Response Plan and complete the implementation of recommendations from the reviews that have been conducted."

AUSTRAC's CEO Nichole Rose said the historic settlement sends a strong message to the banking and finance industry.

"Our role is to harden the financial system against serious crime and terrorism financing and this penalty reflects the serious and systemic nature of Westpac's non-compliance," said Rose.

"Westpac's failure to implement effective transaction monitoring programs, and its failure to submit IFTI 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."

King said the bank has made improvements to its financial crime capabilities since the AUSTRAC investigation commenced, including recruiting 200 financial crime experts and creating a new Group Executive position responsible for the company's financial crime capability.

The new CEO King stepped into the role after Brian Hartzer resigned in the wake of the AUSTRAC allegations.

"We have also undertaken a reassessment of our culture, governance and accountability and are embarking on a comprehensive, multi-year program to strengthen how we manage non-financial risk across the Group," said King.

"This includes a significant investment in training to support our people to better identify, assess and manage risks.

"We are determined to continually lift our financial crime standards, comply with our obligations and uphold our customer, community, and regulatory expectations."

In April Westpac slashed its earnings by $1.03 billion due to AUSTRAC-related matters, including $900 million put aside for a potential penalty.

The bank says it will increase the provision in its accounts for the year ending 30 September 2020 by a further $404 million to account for the higher estimated penalty and for additional costs, including AUSTRAC's legal costs of $3.75 million.

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