Westpac has released the findings of an investigation into its money laundering and child exploitation scandal and says the failures occurred due to a mix of technology and human error, not “intentional wrongdoing”.
The country’s second-largest bank blamed its breaches of anti-money laundering (AML) and counterterrorism financing (CTF) laws on deficient processes, poor understanding and lack of resources.
“While the compliance failures were serious, the problems were faults of omission. There was no evidence of intentional wrongdoing,” Westpac chief executive Peter King said in a statement.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) has accused the bank of failing anti-money laundering and counterterrorism laws on reporting transactions on 23 million occasions.
The financial crimes watchdog last November filed civil proceedings in the Federal Court against Westpac, forcing the bank to set aside $900 million for a potential legal penalty.
The failure properly to adhere to AUSTRAC guidance for child exploitation risk in respect of some products occurred due to deficient financial crime processes, compounded by poor individual judgments, the bank said on Thursday.
The failure concerning non-reporting of international funds transfer instructions occurred due to a mix of technology and human error, some dating to 2009.
Westpac in January set up an external advisory panel, comprising former NBN chairman Ziggy Switkowski, former Sydney Water CEO Kerry Schott and BCG Australia co-founder Colin Carter to review the board’s risk governance and accountability.
The panel found board processes overall were adequate and fit for purpose but said the bank did not “sufficiently appreciate the depth of specialist capabilities required to manage AML/CTF risk”.
The report says there was a failure in the quality of information provided by management to the board and reporting to the board on financial crime matters “was at times unintentionally incomplete and inaccurate”.
“With the benefit of hindsight, and noting the Board’s escalating focus in the area, directors could have recognised earlier the systemic nature of some of the financial crime issues Westpac was facing,” the panel said.
Mr King said accountability has been fixed and a number of staff had faced consequences.
This included disciplinary actions, pay and bonus cuts worth $13 million were applied to 38 executives in 2019 and a number of relevant staff had already left the company, he said.
The bank will not pay out bonuses to the CEO and group executives in 2020.
The scandal led to then Westpac chief executive Brian Hartzer and chairman Lindsay Maxsted stepping down, followed by a string of senior management changes.
Westpac has since set up a new board legal, regulatory and compliance subcommittee and created a new executive position directly responsible for financial crime compliance.
By 1240 AEST, Westpac shares were up 1.1 per cent to $18.15 amid broader gains in the Australian market.