Bankers furious at Austrac penalties as Canberra escapes robodebt accountability

The ban­king industry is preparing to fight against ‘draconian’ anti-money laundering enforcement measures by Austrac.

Westpac has set aside $900m for the Austrac penalty. Picture: David Geraghty

An incipient rebellion by the ban­king industry against “draconian” anti-money laundering enforcement measures is intensify­ing, as leaders compare Westpac’s $1bn penalty and career-ending accountability moves to Canberra emerging unscathed from the robodebt disaster.

“There’s no logic … behind the two outcomes, particularly if you believe Centrelink’s debt recovery program is a more grievous failure because it preyed on (vulnerable) people,” a senior banker said.

While acknowledging Austrac’s serious allegation of a link to child exploitation in some payments made by 12 Westpac customers, he said the bank’s transgressions were overwhelmingly “victimless”.

Last Thursday, Westpac released two reports on the Austrac debacle: a management accountability review overseen by Promontory Financial Group, and a report on board governance by a three-member panel chaired by Ziggy Switkowski.

The probe blamed “sins of omission and not of commission”, estimating that 99.95 per cent or more of the missing international funds transfer instructions related to legitimate and uncontroversial transactions involving government pension payments et al.

Westpac, however, has suffered a heavy toll, with chairman Lindsay Maxsted bringing forward his retirement, chief executive Brian Hartzer losing his job, and non-executive director Ewen Crouch stepping down.

In addition, the bank has set aside $900m for a penalty. Austrac is seeking $1.5bn, more than double the penalty paid by Commonwealth Bank for similar AML breaches in 2017.

In contrast, the robodebt scandal, where the government will repay $721m after unlawfully using income averaging to raise 470,000 debts from welfare recipients, has not claimed one ministerial head or led to accountability measures.

The Weekend Australian reported that some bankers had issued a call to arms against Austrac, accusing it of “virtual entrapment” and “unw

arranted statements” in its court action against Westpac and CBA.

It said the one-way flow of information from the banks to Austrac created a risk of entrapment, and that the agency had made unwarranted statements in its November statement of claim against Westpac when it accused senior management of indifference and the board of inadequate oversight.

The allegations were made as Westpac was raising $500m from retail investors in a share purchase plan. Austrac responded on Friday that it expected regulated businesses to have appropriate systems and processes in place to manage their risk, based on their businesses and the products and services that they provided to their customers.

“Austrac senior executives and our staff regularly engage with regulated businesses on matters of compliance and financial intelligence,” a spokeswoman said.

In the wake of the Westpac and CBA matters, the banking industry is pushing for a debate on the enforcement model used for anti-money laundering and counter-terrorism financing. Insiders said that, once the dust settled, there should be a discussion about “proportionate penalties” and “reasonable requirements and expecta­tions of boards, as well as accountability measures”.

“Accountability has to be proportionate of the misconduct,” a banker said. “What does the community demand in terms of accountability when (in Westpac’s case) the chairman, the CEO and a senior director step down?”

Expectations had been set for “extreme” penalties of billions of dollars, as a result of fines levied on northern hemisphere banks for payments to sanctioned countries. The question had to be asked if inadvertent errors by Australian banks deserved similar treatment.

A suggested reform has been for Austrac to join ASIC and the Australian Prudential Regulation Authority in Treasury, exiting its home in the Department of Foreign Affairs.