Westpac executives could be disqualified, fined over allegations of misconduct

Westpac executives could also cop big fines over alleged breaches of anti-money laundering rules, Josh Frydenberg warns.  

Westpac executives could cop big fines over alleged breaches of anti-money laundering rules, warns Treasurer Josh Frydenberg.

Josh Frydenberg has flagged the prospect of Westpac executives being disqualified by the Australian Prudential Regulation Authority and the imposition of hefty financial penalties, warning that there was a lack of “trust and confidence” among the public towards leading financial institutions.   

 

Speaking on the ABC’s Insiders program, the Treasurer said that there were “very serious issues both in terms of the nature and number of alleged breaches” by Westpac of anti-money laundering and counter-terrorism financing rules.  

Mr Frydenberg confirmed that he had already spoken to Westpac chief executive, Brian Hartzer, as well as Westpac chair, Lindsay Maxsted, saying he “made very clear the seriousness of these issues".

“We’re talking about 23 million alleged breaches of the anti-money laundering laws,” he said.  

“We’re talking about a failure to adequately assess customers with links to child trafficking and child pornography. And we’ve seen from Austrac a statement that there has been indifference by the board; that there’s been a systemic failure by the bank and there’s been inadequate oversight.”

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APRA, which is not saying anything publicly  about Westpac on Sunday, is believed to be preparing to have talks with Austrac and the bank's executives this week.  The regulator is still considering its position and gathering relevant information to see if it will invoke penalties and the Banking Executive Accountability Regime (BEAR). Sources said any APRA response would depend, to some extent, on how Westpac dealt with the Austrac allegations and accountability for compliance failings.  

Mr Frydenberg canvassed the prospect of harsh penalties being handed out to the board and to individuals under the government’s new BEAR system but noted that the new laws only came into effect in 2018 and were not retrospective.

“APRA has the ability under the Banking Executive Accountability Regime to disqualify boards and to disqualify executives where there’s a failure to appropriately enforce and uphold the duties under the legislation,” he said.

“Now that legislation came into force in 2018. It’s not retrospective and some of those alleged breaches date back to 2013. But the anti-money laundering laws are a proscribed activity under APRA. And I know that APRA is looking at it.”

Mr Frydenberg said the scandal had dealt a further blow to the standing of major financial institutions in the public eye.

“There is a lack of trust and confidence among the public after the royal commission with some of our leading financial institutions. And now this,” he said. “These issues develop a momentum of their own. They’ve (Westpac) got an AGM on December 12. And no doubt there will be some very hard discussions between now and then.”

Mr Frydenberg refused to directly say whether the leadership of Westpac should lose their jobs, saying that decisions about who sat on boards were matters for shareholders. He said the make-up of executive teams were matters for boards.

“That being said, these are very serious issues. There must be accountability. AUSTRAC have been highly critical in their statement. And now APRA is looking into it.”   

Mr Frydenberg said that APRA could also apply to the court for fines of up to $500 million for organisations and that every financial institution in the country should “uphold the law.”

Defending the government’s record on economic management, Mr Frydenberg said the decision to bring forward $3.8bn in infrastructure spending was not an admission the economy had stalled.

“The economy continues to grow,” he said. “We believe that investment in infrastructure is a pathway to higher growth, and to more jobs and to boosting the productive capacity of our country.”

“When we came to government unemployment was 5.7 per cent. Today it’s 5.3 per cent. We have a record number of Australians in jobs. We’ve just produced the first current account surplus since 1975. We’ve got the lowest welfare dependency in 30 years. We’ve provided the biggest tax cuts legislated through the parliament in more than 20 years. And the budget is back in balance,” he said.

“And we’re going to deliver a surplus.”

Mr Frydenberg said that any consideration about bringing forward the second stage of the government’s already legislated tax cuts would be informed by the results of the September national accounts which are due in December.   

“What Scott Morrison and myself will not do is impose $387bn of higher taxes, which is the Labor Party’s policies,” he said.