Westpac facing penalties related to money laundering and counter-terrorism laws

The major lender is facing penalties for money laundering and counter-terrorism allegations from Australia’s financial intelligence agency.

Westpac is being hounded by Australia’s financial intelligence agency for alleged breaches of money laundering and counter-terrorism laws.

AUSTRAC chief executive Nicole Rose told reporters this morning the major lender didn’t report more than 19.5 million international funds transfers over five years.

“Westpac failed to pass on information about the origin of international funds transfers and keep records as required,” she said.

The transfers amounted to $11 billion, which Ms Rose said resulted in a “significant loss of intelligence” for the financial crimes agency.

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According to the application filed by the agency to the Federal Court of Australia, Westpac allegedly failed to assess ongoing money terrorism financing risks related to the movement of money, pass on information about the source of funds and keep records relating to the origin of some of the international transfers.

AUSTRAC also alleges that part of the more than 23 million contraventions included a failure to carry out due diligence on transactions to the Philippines and South East Asia where child exploitation risks are rife.

“Westpac failed to introduce appropriate detection scenarios to detect known child exploitation typologies, consistent with AUSTRAC guidance and their own risk assessments,” the application noted.

Westpac has allegedly breached money laundering and counter-terrorism laws, according to Australia’s financial intelligence agency.

Ms Rose said the “serious and systemic noncompliance” flies in the face of laws aimed to protect Australia’s financial system, businesses and the community from criminal exploitation.

“The failure to pass on information about IFTIs (international funds transfer instruction) 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,” she said in the application.

“We have been, and will continue to work with Westpac during these proceedings to strengthen their anti-money laundering and counter-terror financing (AML/CTF) processes and frameworks.

“Westpac disclosed issues with its IFTI reporting, has co-operated with AUSTRAC’s investigation and has commenced the process of uplifting its AML/CTF controls.”

The major lender confirmed the commencement of the civil proceeding with chief executive Brian Hartzer recognising the allegations as “serious and important”.

“These issues should never have occurred and should have been identified and rectified sooner,” he said in a statement. “It is disappointing that we have not met our own standards as well as regulatory expectations and requirements.

Westpac CEO Brian Hartzer says he’s disappointed the bank dropped its standards. Picture: AAP Image/Lukas Coch

“Like many banks around the world, we have been heavily investing in a program of work to improve and bolster the management of financial crime risks including strengthening our policies, data feeding systems, processes and controls.

“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.”

Any penalties will be decided in court, with civil proceedings now underway.

Last year, the Commonwealth Bank agreed to pay $700 million and legal costs to resolve proceedings brought by AUSTRAC after admitting to breaching anti-money laundering and counter-terrorism laws.

The financial intelligence agency launched proceedings in 2017, claiming CBA had breached the laws by failing to monitor tens of thousands of transactions through its smart ATM network.

The intelligent deposit machines were launched in 2012 without appropriate coding that would automatically send legally required reports for cash transactions of more than $10,000 to the regulator.

In mid-2015, AUSTRAC asked CBA for several missing transaction reports, which led the bank to discover it had failed to send the reports.

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