Westpac sues Chubb, AXA, in Austrac compensation claim

Westpac is seeking a $400m windfall from its insurers and will argue in court it was entitled to cover in the wake of the 2019 scandal.

Westpac has launched legal action against a consortium of insurers, as the bank attempts to force a payout to cover its $1.3bn money laundering penalties.

The bank is set to front the NSW Supreme Court on July 26 for the first hearing against the 43 insurers, led by commercial cover heavyweights Chubb and AXA.

The matter sees Westpac seeking almost $400m from the insurers, as part of an insurance policy held by the bank which was intended to cover the bank’s costly Austrac enforcement matters.

Austrac, the financial crime enforcer, slapped Westpac with a $1.3bn penalty in 2019 after finding more than 23 million breaches of anti-money laundering laws by the bank.

The NSW Supreme Court case will see Westpac argue it was entitled to insurance cover in the wake of the scandal.

Westpac will seek to argue the insurance covered it for the provision of professional services, including civil penalties associated with those services.

A Westpac spokesman said the bank had “comprehensive insurance program in place to effectively and efficiently mitigate risk”.

He said this insurance was intended to “cover for potential penalties or charges resulting from civil regulatory action”.

“The decision to commence proceedings is one we’ve taken very seriously and has been considered in line with our legal and regulatory obligations as well as the interests of our shareholders,” the spokesman said.

“As the matter is now before the Court we are unable to comment further.”

The court filing comes almost five years after Westpac paid the $1.3bn Austrac penalty, coming after years of negotiations between the two sides.

Sources indicated Westpac sought to file against the insurers after they refused the bank’s attempts to extract compensation for the penalty.

If successful Westpac could see a windfall amid a challenging period for the banking sector, which faces a profit pinch amid red hot competition in mortgage lending.

Chubb won a key case in 2022, after Star Entertainment sued the insurer for losses suffered from the Covid-19 pandemic.

CBA was successful when it made a claim on its insurance for an Austrac penalty.

CBA previously claimed $145m from its professional indemnity insurance in 2019, in the wake of a $700m penalty from Austrac after the regulator found the bank breached money laundering laws through its Smart ATMs. CBA, however, did not sue its insurers.