How Westpac’s complex software put it in Austrac’s crosshairs

A ‘noodle nation’ of complex software was behind a systems failure that led to Westpac stumbling into Austrac’s crosshairs.

Structured files received through WIBS would then be passed to other systems to ensure payment occurred, and the necessary regulatory reports were filed, including IFTIs. Picture: Hollie Adams

A “noodle nation” of complex software programs was behind a systems failure that led to Westpac stumbling into the crosshairs of financial intelligence agency ­Austrac.

In its defence document lodged with the Federal Court on Friday, Westpac detailed the mind-numbingly complex interaction of programs that was designed to spit out Austrac-compliant international funds transfer instructions.

The debacle started in 2010 and 2011, when the big four banks started a series of projects to change and upgrade its systems for IFTI reporting.

Despite Westpac’s intention to report IFTIs for Bank A and Bank B, two unnamed correspondent banks, this did not occur.

From late 2011, Westpac proceeded under the misapprehension that the project to report IFTIs received as structured or “batched” data files, which could include multiple instructions (or structured files), had been successful. But for this to happen, various computer systems needed to be properly configured.

They included the Qvalent, Westpac Integrated Banking System, Sterling Integrator and Norkom/Detica systems.

This was how the operation was supposed to work: Westpac would receive payment instruction files from the banks through the Qvalent and WIBS systems.

Structured files from Bank A would be received through Qvalent and passed to WIBS for processing, with structured files from Bank B received through WIBS, not Qvalent.

The files received by WIBS would then be processed in WIBS according to a configuration set with each customer.

The configuration would determine if the files required transformation from one format to another, which payment system they should be passed to for processing, and any other customer-specific processing rules.

Structured files received through WIBS would then be passed to other systems to ensure payment occurred, and the necessary regulatory reports were filed, including IFTIs.

If all systems were properly configured, structured files would be received by Westpac through WIBS, converted to an IFTI reporting format, passed to Norkom/Detica using Sterling Integrator, and then processed into an IFTI report in the specified format to be uploaded to AUSTRAC. What could go wrong?

While the systems worked for a number of correspondent banks, they failed for Banks A and B because of technological failures and uncertainty as to which “which arrangements were in scope for which software release”.