It doesn’t get much grubbier than facilitating financial transactions of alleged paedophiles, but Westpac has found itself at the centre of some serious allegations.
In a statement filed with the Federal Court, Austrac alleges Westpac breached 23 million anti-money laundering and counter-terrorism finance laws, some that resulted in possible child exploitation.
One of its customers had been convicted of child exploitation, then opened a series of Westpac accounts and proceeded to make transactions to the Philippines.
In the words of Austrac: “Westpac’s failure to include appropriate risk-based procedures in its anti-money laundering/ counter-terrorism financing program … has exposed the Australian financial system to unacceptable risks, including with respect to possible child exploitation, tax offences, money laundering and terrorism financing.”
The millions of alleged breaches equate to $11 billion in transactions, which is a lot of money.
But this isn’t just about the potential exposure to Westpac if found guilty – or if it decides to settle – but the impact on its reputation.
Banks trade on trust and having robust systems in place. Clearly, Westpac failed spectacularly.
Given the seriousness of the alleged failures, the Westpac board and chief executive Brian Hartzer will need to think carefully how they respond. They have the ghost of CBA to call on.
In Westpac’s favour is a growing scandal fatigue in the public. It seems there is little our banks can do that can shock us now.
We spent 2018 listening to a royal commission that highlighted systemic charging of fees-for-no-service to the living and the dead, AMP repeatedly lying to the corporate regulator, aggressive insurance sales tactics and other unethical and even criminal behaviour.
But if Westpac tries to play this down, it could backfire.
The brutal reality is breaches or alleged breaches of money laundering and counter-terrorism laws have serious consequences.
In this case, Westpac allegedly failed to do a lot of things including carry out appropriate due diligence on 12 of its customers “with a view to identifying, mitigating and managing known child exploitation risks”.
Even worse, Austrac alleges that in 2013 Westpac had been aware of the risks associated with these patterns of transactions relating to possible child exploitation. It did nothing until 2018.
And even then it didn’t go far enough and is still to put in place automated detection scenarios on the other international payment channels. This slowness in addressing problems should be a red flag to the board.
The concise statement of claim says one Westpac customer, who had been convicted of child exploitation offences, opened a number of accounts. Austrac alleged that Westpac identified suspicious activity on one of the accounts that indicated child exploitation but failed to “promptly” review the other accounts.
“This customer continued to send frequent low-value payments to the Philippines through channels that were not being monitored appropriately.”
Even more damning, Austrac alleges that if Westpac had put in place the appropriate automated detection systems across all payment channels, it would have identified the activity sooner.
It highlights why financial institutions need to pay attention to these laws and dedicate the correct resources to ensuring everything is done to comply with the law. If they don’t we end up with a broken system.
Source: Thanks smh.com