ASIC zeroes in on potential Westpac director breaches

The corporate watchdog is looking at whether to take legal ­action against Westpac over its ­alleged 23 million breaches of the law.

ASIC is reviewing Wespac for potential corporate law breaches.

The corporate watchdog is looking at whether to take legal ­action against Westpac over its ­alleged 23 million breaches of the law but says a formal investigation has not yet been launched and no meetings have been held with ­executives from the bank.

An Australian Securities & Investments Commission representative told The Australian the case was on its radar because of potential breaches of the Corporations Act.

Any action taken would centre on whether Westpac directors breached their duties, including the best interests duty, and ­whether they breached section 912A of the act, which deals with general obligations to act “effici­ently, honestly and fairly”.

Austrac last week launched legal action in the Federal Court against Westpac over 23 million alleged breaches of anti-money laundering and counter-terrorism financing laws. The allegations ­include funds transfers that facilitated child exploitation.

The scandal wiped more than $6.5bn off the bank’s market capitalisation last week and analysts say its share price will remain under pressure in the absence of a leadership change.

“The longer there’s this uncertainty, the longer the share price will be depressed,” Lincoln Indicators executive director Elio D’Amato told Business Weekend on Sky News on Sunday. “To go to an AGM with this overhang would be a very difficult situation for investors.”

Westpac’s AGM is scheduled for December 12.

It also comes as Westpac is part-way through the retail component of its $2.5bn capital raising.

“Often these banking scandals can be a trigger for significant board and management changes,” Citi analyst Brendan Sproules said in a recent note to clients. “The National Australia Bank and CBA scandals triggered significant senior executive change that took 12 months to embed into place.”

Also speaking on Business Weekend, Jefferies Banking analyst Brian Johnson suggested it would be difficult for Westpac chief executive Brian Hartzer and chairman Lindsey Maxsted to stay on.

“When we go back and have a look at what NAB faced after the royal commission, it was pretty clear their positions were untenable immediately after that,” Mr Johnson said.

“We’ll have to see how it plays out but I was on the record on the day as saying when I had a look at the potential brand damage from the CBA and NAB (scandals), to me the sheer mention of child ­exploitation is far more damaging to the Westpac brand.”

The bank will be hit with an even greater penalty than the $700m fine handed down to CBA mid-last year over its own anti-money laundering law breaches, he predicted.

“Twenty three million (breaches) by $20m a pop, and Westpac ceases to exist. That is not what the penalty will be. The whole idea of a civil penalty is to extract something, cause a little bit of pain and make sure the industry knows that you don’t do this again … I would think now, after (Attorney-General) Christian Porter is involved, the base level of what is deemed acceptable by society is a number greater than $700m.”

Westpac sought on Sunday to appease shareholders with a plan to improve its anti-money laundering processes by better screening payments and shutting down its LitePay service. Executive ­bonuses will be cut or scrapped and the bank will pump money into child protection initiatives.

Westpac’s response also included adding 200 staff to its ­financial crimes unit, setting up a board ­financial crime subcommittee to deal with the issues and ­investing $25m to bolster its cross-border and industry data sharing.