Aussie bank facing huge fine for money-laundering breaches

SYDNEY - Australian banking giant Westpac faces a massive fine after being accused by regulators on Wednesday of "serious and systemic" breaches of money-laundering laws involving more than $7 billion.

Australia's financial intelligence agency, AUSTRAC, said it had taken legal action against Westpac for failing to report more than 19.5 million international fund transfers, including "high-risk transactions" to Southeast Asian nations potentially linked to child exploitation.

Overall, AUSTRAC chief Nicole Rose said Westpac violated the anti-money laundering and counterterrorism financing law 23 million times.

She did not comment on the amount of a potential penalty for Australia's second-biggest bank, saying it was a matter for the courts.

But in its submission to the Federal Court, AUSTRAC noted that each of the 23 million breaches attracts a civil penalty "between A$17 million and A$21 million" - theoretically putting the bank on the hook for up to A$483 trillion ($330 trillion) in fines.

The global economy was worth almost $86 trillion in 2018, according to the World Bank.

Australia's largest lender, the Commonwealth Bank of Australia, or CBA, last year faced a theoretical maximum fine of A$1 trillion after AUSTRAC found it had failed to report on 53,500 transactions, far fewer than the alleged breaches by Westpac. The CBA ended up negotiating an A$700 million settlement.

Westpac shares closed down 3.3 percent on the news.

Among the most damaging allegations, the regulator accused Westpac executives of "indifference" to clear evidence that some international transfers were used to fund child exploitation.

"Since at least 2013, Westpac was aware of the heightened child exploitation risks associated with frequent low value payments to the Philippines and Southeast Asia, both from AUSTRAC guidance and its own risk assessments," it said.

The regulator added that senior Westpac management was "specifically briefed" in June 2016 on these risks with respect to one of its money transfer channels.

In response to the charges, Westpac CEO Brian Hartzer insisted bank executives have "absolutely not been indifferent" to the issue.

He later held a conference call saying he was personally "disgusted" by the subject matter of some allegations but declined to say whether he would resign.

Hartzer also said many of the transfers cited by AUSTRAC as unreported were "recurring, low-value payments" from foreign government pension funds to people living in Australia.

Australian Prime Minister Scott Morrison, who leads a conservative, pro-business government, said he was "appalled" by the allegations against Westpac and that Australia's banks need to "lift their game".

Rose told a news conference that Westpac's failures "resulted in serious and systemic noncompliance" with anti-money laundering and counterterrorism financing laws.

She said the unreported transactions amounted to more than $7 billion from 2013 to 2018.

Westpac "failed to appropriately assess and monitor the ongoing money-laundering and terrorism financing risks associated with the movement of money into and out of Australia through correspondent banking relationships", she said.

Reuters - AFP