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Westpac is forced to pay record Aus$1.3Billion fine for AML breaches

By Elizabeth Hearst

Australia’s second largest bank, Westpac has agreed to pay a record-breaking fine of A$1.3 Billion ($0.9 Billion) for money laundering breaches. 

Australia’s financial crime watchdog last year reported that the bank had failed to appropriately report over 19 Million international transactions. 

The BBC reports that some of these transactions were potentially related to “child exploitation”. These concerns arose following the Australian Transaction Reports and Analysis Centre’s (Austrac) investigation which identified payments that had been made to operators in the Philippines.

Last year former chairman of Westpac, Lindsay Maxsted said “the notion that any child has been hurt as a result of any failings by Westpac is deeply distressing and we are truly sorry”. Both he and Westpac’s former chief executive have since left their roles in the wake of the scandal. 

Westpac is the second Australian bank to pay enormous fines for breaches in anti-money laundering and counter-terrorism financing laws. If this proposed fine is approved by a court, it will mark the largest civil penalty in Australian corporate history. 

Despite the enormity of the fine, experts have said it could have been larger. Austrac reports that the transactions represented 23 Million law breaches, with each carrying maximum penalties of A$21 Million. 

Present Chief Executive Peter King said on Thursday the bank was “committed to fixing the issues to ensure that these mistakes do not happen again”. The bank had previously reported some of its breaches to Austrac and had informed shareholders of the expected financial penalty. 

According to Austrac, the bank failed to report international transfers to the regulator in a timely manner, as required by law. This amounted to in excess of A$11 Billion between 2013 and 2019, according to Austrac. 

Austrac said that the bank had failed to appropriately carry out due diligence checks on potentially high-risk oversea banks and failed to retain necessary banking records. The watchdog added that there was a small number of payments that were potentially linked to “child exploitation risks”.  

The Guardian reports that the A$1.3 Billion fine is significantly higher than the $900 Million the bank had previously put aside as an estimate of the penalty. The increase comes after the bank admitted an additional 250 customers were potentially linked to child exploitation, a significant increase on the 12 originally noted by the watchdog and bank. 

The bank admitted that it had “completed a review of all child exploitation transaction types for the Philippines, south-east Asia and Mexico over the prior three year period” and had discovered an additional 248 customers who had been making payments “consistent with child exploitation” and subsequently reported their findings to Austrac. 

Chief executive of Austrac, Nicole Rose said that he proposed penalty “reflects the serious and systemic nature of Westpac’s non-compliance” and added that “Westpac’s failure to implement effective transaction monitoring programs, and its failure to submit IFTI (international funds transfer instruction) 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”. 

Westpac’s breach of money laundering is the second significant fine against Australian banks for breaches in anti-money laundering regulations. Westpac’s rival bank Commonwealth Bank recently paid a A$700 Million fine in 2018 for breaches in 53,000 suspect transactions. 

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