On June 4th 2020 Westpac, an Australian bank, released the results of its investigation into its own anti-money laundering (AML) and counter terrorist financing (CTF) compliance issues. The investigation was the result of civil penalty proceedings brought against the bank by the Australian Transaction Reports and Analysis Centre (AUSTRAC), which is responsible for preventing, detecting, and responding to criminal abuse of the financial system in Australia. AUSTRAC claims Westpac’s non-compliance was due to “systemic non-compliance with the Anti-Money Laundering and Counter Terrorism Financing Act [of] 2006”. AUSTRAC’s claims have been largely corroborated in Westpac’s own report.
The three critical elements are:
The failure to report all International Funds Transfer Instructions (IFTIs) – Westpac is required to report all IFTIs that it receives and sends. Westpac failed to report 19.5 million transfers, which have been traced back to 2009.
Child Exploitation – Westpac failed to act upon financial indicators of potential child exploitation. Due to structural deficiencies, they failed to monitor 12 customers whose behaviour was consistent with risk associated with child exploitation.
Correspondent Banking deficiencies – Westpac concluded, in support of AUSTRACS claim, that the bank did not sufficiently assess or carry out the required due diligence on a number of its correspondent banks.
Westpac’s failures, which have been summarised in the report, exhibit widespread systemic failures in the banks AML/ CTF processes and controls:
The AML/CTF risks were not understood across the organisation.
Accountability was not clearly defined, nor embedded in the banks operational structure.
Individuals at the operational level did not understand, or have clearly defined parameters of responsibility in AML/CTF processes.
The bank’s statement explains that the issues were compounded by insufficient AML/CTF expertise and resources. Westpac did not have employees with the correct skillset, experience, and expertise to manage its AML/CTF risk effectively. Such issues were aggravated in 2011/2012 when high staff turnover meant further eradication of skills and experience in Westpac’s AML/CTF framework.
What is Westpac doing to rectify the failings?
Whilst working alongside AUSTRAC to avoid court proceedings Westpac has taken a number of steps to address its short comings:
Re-structuring has taken place with the addition of a regulatory and compliance committee along with a group executive who is responsible for financial crime, compliance and conduct.
Company-wide training initiatives have been introduced as the bank begins a business culture re-assessment that is better prepared to resolve its failings.
Clear lines of accountability have been drawn up for its management, together with a clearer definition of its AML/CTF defence lines and added clarity of staff roles and responsibilities in AML/CTF processes.
Westpac has also revised reporting standards and processes with the aim to embed the guidance from AUSTRAC into its AML/CTF processes.
This is an ongoing process for Westpac. However, what has been refreshing is its transparency and divulgement of information in both the public domain and to AUSTRAC. This demonstrates Westpac’s commitment to Anti money laundering and counter terrorism financing. Time will whether the new processes will be effective.