‘Integrity’ of financial system at stake as $1.3b Westpac fine upheld: Federal Court

Justice Beach said Westpac accounts for a very significant portion of the payments made through Australia’s financial system and therefore a substantial fine was necessary.

Banks needed to ensure transparency of international payments to prevent financial crime, he said. “It’s obvious that money laundering is all about obscuring the origin and destination of funds.”

The financial crimes watchdog AUSTRAC launched legal action against Westpac in November after the bank was found to have breached AML laws 23 million times, including a failure to report 262 customers linked to child exploitation.

Westpac has since made significant investments in bolstering its AML compliance by improving its digital systems and retraining staff. AUSTRAC’s barrister Wendy Harris, QC, said Westpac had demonstrated it took AML compliance “very seriously” but only time would tell if this would be effective.

“Now of course the proof is always in the pudding,” Ms Harris said. “You can have a system but there’s also the implementation of the system, obviously we don’t have a direct line of sight in that regard.”

The Federal Court heard Westpac’s failure jeopardised law enforcement’s ability to fight crime.

“Westpac’s failures resulted in significantly less transparency in the flow of funds in and out of Australia,” Ms Harris said. “They compromised the ability of law enforcement agencies to deal with and prevent unlawful activity, and they undermined the taxation system by denying important information to the ATO [Australian Taxation Office].”

Ms Harris cleared the bank’s board of any wrongdoing but said management oversight of AML compliance had been inadequate.

“There wasn’t any deliberate intention to contravene the [anti-money laundering] Act. They did take steps to ensure Westpac complied,” Ms Harris said. “But despite those steps, that oversight by [the] board and senior management was deficient in a number of respects.”