Westpac’s sorry, but what was Austrac doing?

Westpac reported its breaches to Austrac. Would it have been pulled up anyway? Picture: Hollie Adams

Westpac’s mea culpas for serious governance flaws revealed by the Austrac scandal are a given. The question left unanswered is just what Austrac, the financial transactions monitor, was doing when the Westpac’s 23 million breaches were committed.

The bank, it will be remembered, self-reported the breaches. So, if Westpac had not come clean, who was going to catch up with the fact that Australia’s second largest bank was potentially enabling paedophiles in the Philippines.

The saga also tells you a lot about what is wrong with corporate Australia, starting with the admitted corporate governance failures starting at board level, where directors failed to ask questions, and down to management for not conducting basic checks.

Back in 2017 Tabcorp was fined $45 million for money laundering breaches but the fine went relatively unnoticed, perhaps because people, and certainly bank boards, felt Tabcorp as a gaming company was bound to attract low-lifes who would launder money.

Not so a big four bank - until Commonwealth Bank admitted the same thing and in 2018 reached a $700m settlement over breaches of anti-money laundering laws.

All of a sudden everyone took notice and questions were rightly asked about Commonwealth Bank’s lack of governance.

Heads rolled, with a new CEO and chair installed, because suddenly the big four banks realised they were up to it with their sleeves rolled back.

That’s when Westpac took notice and started having a look at itself. Lo and behold it found 23 million breaches and told the folk at Austrac.

Now Austrac may have been asleep at the wheel, but it certainly picked up its marketing skill, which is why a $45 million fine for Tabcorp will develop into a circa $1 billion hit on Westpac.

Nothing like talk of paedophiles and 23 million breaches to get the penalties dialled up.

Meanwhile, in the aged care industry, Bupa has admitted to hundreds of cases of charging old people for services they didn’t receive. It was fined $6 million and ordered to compensate aged care residents to the tune of $18.3m.

Now what justifies the variation in penalties?

The biggest problem with corporate Australia is it is highly concentrated, with banking a case in point. The top four banks control 90 per cent of the market, with everyone working at some stage in their career for everyone else.

Over at NAB there is former Westpac CFO Phil Chronican as chair after a term at ANZ running retail, his CEO Ross McEwan used to be the heir apparent at CBA and at Westpac retail chief David Lindberg will shortly take his ANZ banker wife with him to RBS in London to follow in the footsteps of McEwan and former ANZ and Westpac boss Brian Hartzer.

Did someone say cozy club?

Little wonder these governance scandals have a history of repeating themselves.