Australian Watchdog Hits Westpac With Civil Claim Over AML, Other Failings

Tom Burroughes

27 December 2023

Australia's banking and wealth industry must have hoped to have drawn a line under a slew of scandals that tainted its reputation. But as 2019 enters its final month, new revelations have dealt another blow, this time at , or Austrac, is seeking civil penalties from Westpac because of what it calls "systemic non-compliance" with anti-money laundering and counter-terrorism financing laws. The organisation claims the bank broke AML/CTL laws on more than 23 million occasions.

"It is alleged that Westpac’s oversight of the banking and designated services provided through its correspondent banking relationships was deficient. Westpac’s oversight of its AML/CTF Program, intended to identify, mitigate and manage the money laundering and terrorism financing risks of its designated services, was also deficient," Austrac said in a statement earlier this week.

“These AML/CTF laws are in place to protect Australia’s financial system, businesses and the community from criminal exploitation. Serious and systemic non-compliance leaves our financial system open to being exploited by criminals,” Nicole Rose, Austrac's chief executive said. “The failure to pass on information about IFTIs to AUSTRAC undermines the integrity of Australia’s financial system and hinders AUSTRAC’s ability to track down the origins of financial transactions, when required to support police investigations.”

The saga is the latest case to hit Australia's financial services sector. Late in 2017, the government created a Royal Commission to probe a raft of problems around mis-selling, weak AML controls and lapses, and other problems. Senior figures at a number of banks have resigned and been replaced. (See an overview of these stories here.)

"Regulators have been pressing banks and other financial institutions to strengthen their AML-CFT practices and systems for years. Failings to prevent money laundering over a long period of time highlights a systemic problem within the banking sector," Bambos Tsiattalou, founding partner and specialist white collar criminal defence lawyer at criminal defence firm Stokoe Partnership Solicitors, said about the Westpac case. "The due diligence banks carry out on clients and complex transactions can be perfunctory, and lacking in real depth and understanding. While processes and monitoring systems are important, human intelligence is often crucial in detecting issues."

Westpac
“We recognise these are very serious and important issues. We are committed to assisting Austrac and law enforcement agencies to stop financial crime," Westpac Group’s chief executive, Brian Hartzer, said in a statement. “These issues should never have occurred and should have been identified and rectified sooner. It is disappointing that we have not met our own standards as well as regulatory expectations and requirements."

"We have implemented a range of additional steps in our processes including enhanced automatic detection systems and we continue to proactively engage with Austrac to close any remaining gaps to meet their requirements as well as our own expectations. We are also an active member of the Fintel Alliance," he continued.

"As part of this we are also taking very seriously Austrac's concerns around appropriate customer due diligence on transactions to the Philippines and South East Asia, including reviewing relevant processes," Hartzer said.

“In relation to IFTIs, we have closed the ACM product and reported all the relevant transactions to Austrac. The majority of the payments for which the reports were not generated were recurring, low-value payments made by foreign government pension funds to people living in Australia," he said.

He added: "Westpac is carefully reviewing the claim and will be working constructively with Austrac to resolve the matter."