BoQ review confirms no known Austrac non-reporting issues

Austrac review of compliance with anti-money laundering legislation reveals no non-reporting issues.

Chief executive George Frazis said the bank had a comprehensive program to strengthen its controls and make improvements identified in the Austrac report. Picture: Bloomberg

Bank of Queensland has reaffirmed it is unaware of any non-reporting issues with the financial regulator Austrac, as the regional lender prepared shareholders for a tough year before benefits start flowing from new chief executive George Frazis’s transformation.

At BoQ’s annual meeting in Brisbane, chairman Patrick Allaway acknowledged the bank’s share price had underperformed “for a few years now”, and that shareholders were rightly dissatisfied.

“We take accountability for this and are finalising our new strategy to improve the performance of the business, develop a more sustainable business model for the current low growth environment, and return the business to profitable growth,” Mr Allaway said.

READ MORE: BoQ ‘strengthens’ to launch $275m capital raising | Bank of Queensland warns of tough year ahead, as cash profit drops 14pc

Shareholders sought reassurance from directors about any outstanding Austrac matters after BoQ disclosed in its 2019 annual report that it had received a review from the regulator identifying potential compliance contraventions of anti-money laundering and counter-terrorism financing (AML/CTF) legislation.

Mr Frazis said he wanted to be clear that the bank was not aware of any instances of non-reporting to Austrac.

All of the bank’s international payments, he said, were processed through the SWIFT payments network, and therefore had the appropriate monitoring and reporting attached to them.

“We continue to work with all regulators to improve our risk controls, monitoring and reporting,” the BoQ boss said.

BoQ’s position is in stark contrast to Westpac and Commonwealth Bank, both of which have been in Austrac’s crosshairs after multiple AML/CTF transgressions.

Austrac alleged in a bombshell statement of claim last month that Westpac had breached the law more than 23 million times.

The bank is now in discussions with Austrac about a financial penalty that could top $1bn.

This comes after CBA’s payment of a record $700m penalty.

Cash earnings for BoQ slumped 11 per cent in 2019 to $298m, leading to a 14 per cent cut in the annual dividend to 65c.

No short-term bonus was paid to the leadership team, which was instrumental in the support of the three main proxy advisers for BoQ’s remuneration report.

The report passed with 93.5 per cent support, with a “no” vote of only 6.4 per cent.

An award of performance rights to Mr Frazis attracted a “yes” vote of 92.6 per cent.

The BoQ chief said the result was disappointing and the management team recognised this, with a number of areas requiring attention.

The bank, he said, had to fix its retail business, improve its onerous lending processes, address rising costs, and close the digital gap with its peers.

BoQ would return to profitable and sustainable growth, but a transition period was required to achieve this.

It was also necessary to strengthen the bank through robust risk and compliance standards and maintenance of a strong balance sheet.

An important development, according to Mr Frazis, was the decision to keep building on the momentum of Virgin Money Australia, after the successful completion of the stage one digital bank proof of concept.

Building stage one would require $30m of capital expenditure in the 2020 financial year ahead of a targeted launch next year.

More broadly, BoQ reaffirmed guidance of lower cash earnings in 2020, with revenue and impairments in line with last year subject to market conditions.

“We also expect higher post-Hayne regulatory and compliance costs and increased operating expenses related to our investment in technology,” Mr Frazis said.

“BoQ fundamentally is a good business with a sound platform for differentiation. Investments are underway. I am undertaking a detailed review of all of our businesses.”

Mr Frazis said he would report back to the market in February.