Australia’s anti-money-laundering and terrorism financing regulator, AUSTRAC, has formally applied for civil penalty orders against Westpac Banking Corporation, per a regulatory report.
The orders focus on Westpac’s alleged non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
In particular, Westpac is facing allegations in lapses of oversight, specific to its banking and designated services. AUSTRAC’s civil penalty orders against Westpac also center on the oversight of its AML/CTF Program.
These were originally intended to identify and manage the money laundering and terrorism financing risks of its designated services, which were deemed lacking in its case to the Federal Court of Australia.
For its part AUSTRAC Chief Executive Officer, Nicole Rose defended the regulator’s decision following a lengthy investigation into Westpac.
“These AML/CTF laws are in place to protect Australia’s financial system, businesses and the community from criminal exploitation. Serious and systemic non-compliance leaves our financial system open to being exploited by criminals,” she noted.
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AUSTRAC is stipulating that these oversight failures resulted in serious and systemic non-compliance with the AML/CTF Act on as many as 23 million occasions.
“The failure to pass on information about IFTIs to AUSTRAC undermines the integrity of Australia’s financial system and hinders AUSTRAC’s ability to track down the origins of financial transactions, when required to support police investigations.”
Failure on many fronts
A closer look at the orders reveals a list of lapses alleged of Westpac, including the following:
- Adequately assessing and monitoring ongoing money laundering and terrorism financing risks associated with the movement of money into and out of Australia. AUSTRAC specifically highlighted Westpac’s correspondent banking relationships.
- The orders allege Westpac failed to report over 19.5 million International Funds Transfer Instructions (IFTIs) to AUSTRAC over five years for transfers both into and out of Australia.
- Westpac had improperly passed on information about the source of funds to other banks in the transfer chain. This conduct deprived the other banks of information they needed to understand the source of funds to manage their own AML/CTF risks.
- During this period, records relating to the origin of some of these international funds transfers were notably absent.
- Westpac also apparently failed to carry out appropriate customer due diligence on transactions to the Philippines and South East Asia. These areas are at a systematic risk for child exploitation.
What’s next for Westpac?
AUSTRAC holds a wide range of powers of enforcement, and in this case, the impending investigation could yield multiple finalities for Westpac.
More specifically, AUSTRAC has the power to issue infringement notices, issue remedial directions, or force the banking group into taking specified actions.
Furthermore, the regulator can push for enforceable undertakings during which Westpac can comply with the AML/CTF Act or cease entirely. Finally, injunctions or penalties in Federal Court also cannot be ruled out.
Finance Magnates will continue to update this story as it develops.