- Westpac has made history in the Australian corporate space by agreeing to pay A$1.3 billion fine for financial misconduct and failing to notice transactions possibly related to child exploitation.
- The settlement was made between the bank and Australian Transaction Reports and Analysis Centre (AUSTRAC).
- Chief executive Peter King apologised for the misconduct and promised that Westpac would improve all security measures they currently have for money laundering.
- Westpac shares were down 0.122% today with investors hoping that the bank will move on from this incident after some time.
Westpac Banking Corporation (ASX:WBC) revealed that it would pay a fine worth A$1.3 billion for money-laundry misconduct and failing to halt transactions linked to child exploitation. The bank, unfortunately, made history as it is the biggest fine in Australia’s corporate world.
The financial settlement was conducted between Westpac and the Australian Transaction Reports and Analysis Centre (AUSTRAC).
There were more than 23 million alleged breaches that were against the Anti-Money Laundering and Counter-Terrorism Financing Act, which Westpac Chief Executive Peter King apologised for in his statement. He also stated that the bank would make sure this event never happens again.
The fine is almost twice as big compared to the last one paid by the Commonwealth Bank, worth A$700 million for financial misconduct. Com Bank settled for 54,000 breaches back in 2017.
According to AUSTRAC, Westpac did not manage to report more than A$19.5 million of international funds transfer instructions (IFTI), worth about A$11 billion in total. Westpac also got accused of allowing financial transactions that have now been connected to child exploitation and terrorism.
There were twelve particular customers whose behaviour triggered AUSTRAC attention regarding child exploitation from South East Asia.
AUSTRAC chief executive Nicole Rose stated the fine showed AUSTRAC’s strong belief that all serious crime of this sort must be halted and has sent a strong message for the future of the financial industry.
It is believed that if Westpac had a proper safety system, more than 250 suspicious customers’ intentions could have been stopped.
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The AUSTRAC complaint was sent to the Federal Court in November 2019.
The two parties settled with the mentioned fine, which Treasurer Josh Frydenberg had welcomed. Mr Frydenberg also implied the importance of stopping these kinds of behaviour in the future.
Kristina Keneally, Shadow Home Affairs Minister, described the Westpac behaviour as a massive failure due to the lack of proper security measures. In her opinion, the most disturbing fact about this historical transaction is the connection to child exploitation.
Mr Peter King stated that the settlement was planned, as it would provide more certainty for Westpac investors and for enhancing their future performance while obeying the law.
Mr King also said that Westpac has a significant role in the monetary system so they will work on strengthening their capability to deal with financial crime.
In addition to the incident, Westpac hired more than 200 individuals to avoid future financial crimes, as well as designed a new role for financial crime responsibility.
What is the impact?
Westpac share price nearly hit the A$16-mark before settling at A$16.370, a decline of 0.122%.
Even though the fine made history for being the biggest, the market was expecting something similar, reflected in the marginal fall in shares today. Analysts believe that for Westpac, which generated a net profit of nearly A$6.8 billion in FY2019, the additional amount (Westpac had earlier anticipated a fine of A$900 million) should not have a substantial impact.
As Westpac has made several changes in following their failure, investors hope that the affair will be left behind in some time.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
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