Daily Management Review

Huge Fine Likely For Australian Bank Over Anti-Money Laundering Breaches


Huge Fine Likely For Australian Bank Over Anti-Money Laundering Breaches
Civil penalty orders have been sought against the Australian bank Westpac by the Australian anti-money laundering regulator AUSTRAC for lack in oversight in anti-money laundering and terrorism financing cases.
It has been alleged that breach of the Anti-Money Laundering and Counter-Terrorism Financing Act had been made by the bank on more than 23 million transactions which included it failing to conduct adequate monitoring of the accounts of a convicted child sex offender who managed to regularly transfer money from his account to various accounts in Philippines.
In its appeal, AUSTRAC alleged that Westpac more generally did not "carry out appropriate due diligence on customers sending money to the Philippines and South East Asia for known child exploitation risks."
During a period give years, instructions to the bank about international funds transfer instructions for moving money into and out of Australia for about more than 19.5 million times has not been reported by Westpac, the anti-money laundering regulator alleged.
Westpac "allowed correspondent banks to access its banking environment and the Australian Payments System without conducting appropriate due diligence" related to these transfers, AUSTRAC alleged.
A few of the banking partners of Westpac are operational in some of the high risk countries of the world including the likes of Iraq, Lebanon, Ukraine, Zimbabwe and Democratic Republic of Congo and this has potentially allowed criminals, terrorists and sanctioned individuals or governments for transferring of money to and from Australia.
Westpac’s behavior was described by AUSTRAC's chief executive officer Nicole Rose as "serious and systemic non-compliance". He said this in a very brief statement before the media at Parliament House. "Serious and systemic non-compliance leaves our financial system open to being exploited by criminals," he said.
The scale of the theoretical maximum fine Westpac could face was also outlined in the conscise statement of claim by AUSTRAC. "Westpac has contravened the act on over 23 million occasions, each contravention attracting a civil penalty between $17 million and $21 million," the regulator noted.
The amount of the fine can potentially be $391 which is the lower end of those maximum penalties, calculated on the basis of the 23 million contraventions allowed by the bank.
But the actual penalty paid is likely to be much smaller which has been highlighted in the Commonwealth Bank money laundering case. For example, only $700 million in penalties for 53,700 breaches was paid as settlement with the AUSTRAC by CBA even though it potentially faced a theoretical maximum penalty of close to $1 trillion.
The statement of claim by AUSTRAC was even more damning for the bank and its management compared to the statements it gave in the media. "These contraventions are the result of systemic failures in its control environment, indifference by senior management and inadequate oversight by the board," it alleged.
"They stemmed from Westpac's failure to properly resource the AML-CTF function, to invest in appropriate IT systems and automated solutions and to remediate known compliance issues in a timely manner. They have occurred because Westpac adopted an ad hoc approach to ML/TF [money laundering/terrorism financing] risk management and compliance," the anti-money laundering regulator said.

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