Westpac has blamed “a mix of technology and human error” for not complying with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations that have the bank looking at a $900 million fine.
Last year, the Australian Transaction Reports and Analysis Centre (AUSTRAC) filed a claim alleging that Westpac failed to report 19.5 million International Funds Transfer Instructions (IFTI) worth up $11 billion.
Westpac is required to report to AUSTRAC all IFTIs that it sends and receives.
The bank also allegedly failed to mitigate the risk of child exploitation by monitoring suspicious account activity.
In a statement to investors this week, Westpac said the IFTI reporting errors – which lasted from 2013-2019 – began with the upgrade and implementation of an IT system that “was not completed satisfactorily”.
“Resource constraints in the relevant technology team impacted the successful implementation of the project,” the Westpac statement said.
“In 2011/12, there was also a high turnover of staff where a whole team departed to join another organisation.
“The loss of continuity and specialist knowledge associated with these departures contributed to the implementation errors.”
According to Westpac, the post-implementation review of this IT system “gave assurance to management that all IFTIs were being noted as required”.
They were not. Westpac management thus had what it said was “misleading level of confidence” in its IFTI reporting systems.
Furthermore, Westpac admitted the bank simply “did not have a consistently clear understanding and appreciation” of its anti-money laundering and counter-terrorism financing obligations.
Westpac’s CEO at the time of the AUSTRAC allegations, Brian Hartzer, stepped down when the regulator began legal proceedings.
New CEO, Peter King, said cultural issues contributed the widespread reporting failure.
“We recognise we need to change,” King said.
“We completely accept that some important aspects of Westpac’s financial crime risk culture were immature and reactive, and we failed to build sufficient capacity and experience in some important areas.
“We have learned from this and are absolutely committed to making amends for this event.”
At the time of its filing against Westpac, AUSTRAC CEO, Nicole Rose, said Westpac’s non-compliance was reckless.
“These [anti-money laundering and counter terrorism] laws are in place to protect Australia’s financial system, businesses and the community from criminal exploitation,” Rose said.
“Serious and systemic non-compliance leaves our financial system open to being exploited by criminals.
“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.”
A trial date for the court case between Westpac and the regulator has not yet been set.