Bank letters reveal stuff ups and IT glitches behind child exploitation scandal

A paper trail has allegedly revealed the scandal-plagued banking giant failed to disclose millions of serious breaches for 15 long months.

Westpac took 15 long months to report potentially dodgy international transactions and was behind six million more serious breaches than previously believed, according to explosive new claims.

The 200-year-old lender has dominated headlines for days after financial watchdog AUSTRAC alleged it failed to investigate customers who made transactions possibly linked to child exploitation in the Philippines and South-East Asia.

According to the Australian Financial Review, some payments may have gone towards “live-streamed child abuse”.

The lender is also accused of breaching money laundering and counter-terrorism finance laws, with Westpac publicly accused of 23 million breaches in total.

The crisis deepened when comments allegedly made by chief executive Brian Hartzer to senior staff were leaked to The Australian, including claims the scandal “was not playing out as a high street issue” and that the Westpac board “don’t need to overcook this” because “for people in mainstream Australia going about their daily lives, this is not a major issue”.

Embattled Westpac CEO Brian Hartzer will step down within days. Picture: AAP Image/Lukas Coch

The saga has claimed Mr Hartzer’s job, along with chairman Lindsay Maxsted, who will bring forward his retirement to the first half of next year.

But new claims reported today reveal the scandal runs even deeper than first thought.

According to the Australian Financial Review, “confidential letters” sent by Westpac to AUSTRAC reveal the bank was responsible for 29 million breaches in total – six million more than has been publicly reported so far.

However, that extra six million can’t be prosecuted because they fall outside the statute of limitations.

The publication also reports the documents – which summarise Westpac’s own investigation into the problem – allege a bungled 2011 IT update meant automatic reporting for certain payments known as international funds transfer instructions (IFTIs) with a number of banks failed.

The issue went undetected for six years, and took an extra year to be fixed – but by that time, Westpac already racked up a “theoretical” $40 trillion penalty, which the Australian Financial Review explains is based on “the legislative penalty of $17 million to $21 million for failing to notify AUSTRAC within 10 days of an international money transfer”.

The documents also allegedly show a number of junior staff members discovered that some payments weren’t being reported, but the information was not escalated.

DAMNING MEMO

On top of those revelations, The Australian also claims an internal Westpac breach system memo shows the bank knew the “end-to-end” process for reporting international transfers to AUSTRAC was “not clearly understood” by high-level staffers as far back as mid-2017.

“As a result, management does not have a complete view of the risks to IFTIs reporting and may not fully understand the impact of changes to data on IFTIs reporting, potentially resulting in noncompliance,” the memo states.

“There are gaps in coverage and understanding of responsibilities across the end-to-end data flow and reporting process for IFTIs.”

It appears Westpac was responsible for more breaches than previously thought.

FALLOUT CONTINUES

Yesterday, Westpac was accused of “hypocrisy” for hosting an extravagant lunch dedicated to the fight against human trafficking in 2016, while potentially helping to facilitate child sex trafficking behind the scenes.

US-based reporter and globally recognised human trafficking expert Christine Dolan was the guest speaker at the glittering event, and since the lunch was held, the bank has also released an annual “Slavery and Human Trafficking” statement touting its “zero tolerance” for the criminal practice.

The Westpac website also boasts a commitment to a slew of noble causes, including the environment and sustainability, human rights and indigenous reconciliation – but the unfolding scandal prompted a slew of commentators and members of the public to slam the bank’s “virtue signalling”.

In another embarrassing twist, Westpac was also caught advertising for a Financial Crime Program job in the midst of the massive child exploitation scandal.

“Westpac is passionate about financial crime and recognises that we have a responsibility to protect our communities from criminals who seek to use bank systems to store, obtain and move money,” the job ad, which is still visible on LinkedIn, states.

And today, there are renewed calls for more directors to step down from Westpac’s board in the wake of the crisis, with the Sydney Morning Herald reporting proxy advice firms are now pushing for shareholders vote against the re-election of board members Peter Marriott and Nerida Ceasar.

Labor has also vocally bayed for more Westpac blood to be spilt.