Westpac takes battering

Bank accused of breaching laws 23 million times

WESTPAC shares have hit a six-month low after Australia’s financial intelligence agency accused the country’s second largest lender of breaching anti-money laundering and counter-terrorism financing laws more than 23 million times.

The court action by AUSTRAC – which also alleges Westpac failed to properly investigate transactions to the Philippines and other parts of Southeast Asia related to potential exploitation of children – could lead to a huge fine.

Rival Commonwealth Bank lost its CEO when AUSTRAC launched a similar case involving 53,000 breaches of moneylaundering and terrorismfunding laws, and settled the case last year for an Australian corporate record $700 million.

Westpac shares dropped as much as 3.5 per cent yesterday on claims including that the bank knew of the heightened child exploitation risks associated with frequent low value payments to Southeast Asia in 2013, but did not act for several years. The regulator said it met with the bank in June 2016 to discuss risks linked to Westpac’s LitePay channel, but that Westpac did not implement the appropriate automated detection scenarios until June 2018.

AUSTRAC said it is seeking fines of up to $21 million for every transaction Westpac did not monitor adequately or report on time.

Westpac chief executive Brian Hartzer, who has led the bank since February 2015, said the lender had already publicly disclosed that it had self-reported failures around a large number of international funds transfers. Nonetheless, he admitted the problems identified should never have occurred and should have been fixed sooner.

“It is disappointing that we have not met our own standards as well as regulatory expectations and requirements,” Mr Hartzer (pictured) said.

Mr Hartzer said the bank was committed to working with AUSTRAC on stamping out financial crime and was “taking very seriously” the concerns related to transactions to Southeast Asia.

Prime Minister Scott Morrison hit out at Westpac over the allegations.

“I’m appalled. I’m absolutely appalled,” he told reporters in Brisbane.

“They’ve just got to lift their game on this stuff.”

Westpac shares dropped as much as 3.5 per cent to a sixmonth low $25.63 and closed 3.3 per cent lower at $25.67.

The bank’s share price last hit a trough that deep after May’s disappointing first-half profit.