ASIC drops ‘compliance’ charges against Westpac

ASIC cleared Westpac, just four months after rival CBA received a similar reprieve for its financial crimes failures.

Westpac’s new chairman John McFarlane addressed concerns over the banks many run ins with regulators at its annual general meeting earlier this month. Picture: NCA NewsWire/Bianca De Marchi

The corporate regulator has backed away from taking enforcement action against Westpac for a spate of damning compliance failures, that culminated in the bank paying a record $1.3bn penalty to Austrac.

The Australian Securities and Investments Commission cleared Westpac late on Wednesday, just four months after rival Commonwealth Bank received a similar reprieve for its financial crimes failures.

“ASIC has today informed Westpac that it has concluded the investigation and that it does not intend to take any enforcement action against Westpac or any individuals in connection with the investigation,” Westpac’s statement to the ASX said.

The statement noted that ASIC started the probe following the civil proceedings commenced by Austrac in the Federal Court in November last year. That probe came as the banking regulator also commenced an investigation into matters related to the proceedings and more than 23 million breaches of anti-money laundering and counter terrorism financing laws.

Some of Westpac’s breaches were linked to the financing of child exploitation material, spurring outrage at the bank’s compliances lapses.

While ASIC was largely looking at conduct and for any breaches of the Corporations Act, the Australian Prudential Regulation Authority was examining potential contraventions of the Banking Act 1959.

APRA is also looking at whether it can enforce penalties on individuals via the Banking Executive Accountability Regime.

The scandal at Westpac had far reaching consequences for the bank including claiming the job of then chief executive Brian Hartzer and bringing forward the retirement of former chairman Lindsay Maxsted. Senior executives also had their bonuses scrapped and the bank this month entered into an enforceable undertaking with APRA.

At the time of the undertaking APRA hit out at Westpac’s slow progress in remediating problems. The regulator has also forced Westpac to hold $1bn in additional capital, due to its risk management issues.

In August, after three years of hard slog, ASIC wrapped up its investigation into CBA’s handling of its anti-money laundering and counter terrorism financing breaches and informed directors and executives no action would be taken.

While CBA paid a $700m penalty to settle the Austrac case in June 2018, ASIC continued its investigation.

Following ASIC’s decision on CBA the conduct regulator’s then deputy chairman and head of enforcement Daniel Crennan QC told a parliamentary committee that the nub of the problem was a lack of evidence.

Westpac’s new chairman John McFarlane addressed concerns over the banks many run ins with regulators at its annual general meeting earlier this month. He said bank had “dealt with” accountability for a liquidity ratio reporting blunder and the Austrac matter and continued to implement improved risk and compliance processes.

This month, The Australian revealed Westpac conducted an internal investigation into liquidity reporting failings in New Zealand which led to the departure of a treasury executive across the Tasman.

At the AGM, Mr McFarlane also signalled Westpac was reviewing pay structures in its current financial year and could amend its approach, pending consultation with shareholders.

“I have a personal view on this... I’m not in favour of short-term incentives, I would prefer remuneration to be much longer term for the most senior members of the bank including the chief executive,” he said. “I’d like that to be a position going forward. We don’t have a plan on that but the remuneration committee will consider the issue.”