Maxsted denies market kept in dark on Austrac

Westpac chairman Lindsay Maxsted repeatedly denied the market was not informed about its exposure to a massive Austrac penalty.

Westpac chairman Lindsay Maxsted at the bank AGM on Thursday. Picture: Colin Murty.

Westpac chairman Lindsay Maxsted has repeatedly denied the bank failed to keep the market fully informed about its exposure to a massive Austrac penalty.

Mr Maxsted jousted with a shareholder over the issue, as class action law firm Phi Finney McDonald — and potentially other firms — signalled their intention to mount a case against the bank over alleged breaches of its disclosure obligations.

The shareholder, Linda Hazlehurst, said there had been no indication from Westpac about the type of enforcement action Austrac was contemplating. This was despite the board’s awareness of a problem with the non-reporting of IFTIs (international funds transfer instructions) since August 2018.

Mr Maxsted said there was no provision raised in the 2019 ­accounts because it would have breached accounting standards.

“(The standards) do not allow what we might have thought might have been the number,” the chairman said. “So we had no choice about putting it on as an ­actual liability, which is why we went to great pains to disclose it.

“We are very satisfied we made the appropriate disclosures given what we knew at the time.”

Ms Hazlehurst persisted, saying Westpac would take “an enormous hit” in the present financial year and it was unclear how it could not have made a provision.

“I was completely surprised that it involved this many transactions and we could have been in ignorance about Austrac,” she said.

The financial intelligence agency fired off its statement of claim on November 20, alleging Westpac had breached anti-money laundering and counter-terrorist financing laws on more than 23 million occasions.

More than two weeks earlier, Westpac announced the completion of a $2bn placement to ­institutional investors.

A share purchase plan, which closed on December 2, ultimately raised more than $770m, although retail investors were given the ­option of withdrawing following the Austrac announcement.

The corporate watchdog has launched an investigation into Westpac’s dealings with Austrac, which likely include the circumstances surrounding the $2.7bn capital raising. Estimates suggest the financial penalty imposed by Austrac will be about $1bn.

The two parties are now in ­negotiations about an agreed statement of facts to present to the Federal Court.

Note 27 in the bank’s 2019 ­accounts says Austrac had issued several detailed statutory notices over the past 12 months requiring information related to the group’s processes, procedures and oversight.

The notices, it says, covered a range of matters, including “IFTI reporting failures and associated potential failings related to record keeping and obligations to obtain and pass on certain data in funds transfer instructions, as well as correspondent banking due diligence, risk assessments and transaction monitoring”.

Westpac had not received an indication from Austrac about any enforcement action it might take, although it could include civil penalty proceedings and result “in a significant financial penalty, which Westpac is currently unable to reliably estimate”.