Australian financial crime watchdog, AUSTRAC, has applied for civil penalty orders against Westpac bank over 23 million instances of money laundering failures.
Related story: NAB facing money laundering penalties
Related story: Money laundering watchdog targets Westpac
Related story: AFP seizes $17.3 million of Australian real estate
Westpac had made 23 million breaches of Australian Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) laws, resulting in “serious and systemic non-compliance”, AUSTRAC said on Wednesday.
Around 19.5 million international fund transfers amounting to $11 billion were not reported to the regulator.
AUSTRAC alleges Westpac also failed to carry out due diligence on transactions to the Philippines and South East Asia with recognised child exploitation indicators.
And, AUSTRAC says Westpac didn’t introduce any measures to detect the known child exploitation processes.
In an explanatory document, AUSTRAC said there were 12 Westpac customers in particular who should have been watched closely, due to child exploitation risks, and that Westpac knew about the risks since 2013.
“Over a number of years, there were repeated patterns of frequent low value transactions on accounts held by each of these 12 customers that were indicative of child exploitation risks. Since at least 2013, Westpac was aware of the heightened child exploitation risks associated with these patterns of transactions,” the statement read.
Despite this, AUSTRAC claims Westpac did not implement appropriate detection scenarios until June last year.
“Had Westpac been applying appropriate automated detection scenarios across all channels, this highly suspicious activity would have been identified sooner. Some of the undetected transactions involved payments to alleged or suspected child exploitation facilitators.”
AUSTRAC claimed one customer had opened several accounts after serving time for child exploitation, and while Westpac quickly identified suspicious behaviour on one account, failed to quickly review the other accounts.
The customer continued to send payments to the Philippines through the bank.
“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,” AUSTRAC CEO Nicole Rose said.
The regulator said the major bank failed to report more than 19.5 million International Funds Transfer Instructions (IFTIs) to AUSTRAC over five years, and that information about these transfers provides “vital information” needed to protect the Australian banking sector and Australian community from harm.
“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.”
Commonwealth Bank paid $700 million fine for similar breaches
Australia’s biggest bank, the Commonwealth Bank was forced to pay the largest fine in Australian corporate history of $700 million over 50,000 breaches, while Westpac is facing claims of 23 million breaches.
NAB could also face a large fine from AUSTRAC, noting in its full annual report last week that it may have been involved in a breach of the AML/CTF laws.
"Given the large volume of transactions that the group processes, the undetected failure of internal AML/CTF controls, or the ineffective implementation or remediation of compliance issues, could result in a significant number of breaches ... and significant monetary penalties,” the bank said.
It said faulty implementation of ‘Know Your Customer’ requirements, systems and processes to do with transaction monitoring and other financial crime risks were trouble spots for the bank.
"The potential outcome and total costs associated with the investigation and remediation process remain uncertain," NAB said.
In a statement on Wednesday morning, Westpac said it acknowledges the proceedings, and has received a statement of claim from AUSTRAC which commences civil proceedings.
It said it had previously disclosed this failure, including in its Full Year 2019 reporting.
“Westpac is currently reviewing AUSTRAC’s statement of claim and will issue a further
statement to the ASX once it has been assessed,” the spokesperson said.
More to come.
Make your money work with Yahoo Finance’s daily newsletter. Sign up here and stay on top of the latest money, news and tech news.