The Westpac Banking Corp (ASX: WBC) share price is amongst the worst performers on the benchmark ASX 200 index on Wednesday.
The banking giant’s shares are down 3% to $25.76 in afternoon trade.
Why is the Westpac share price sinking lower today?
Investors have been selling Westpac’s shares after AUSTRAC commenced civil proceedings against it in relation to alleged contraventions of its obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act.
This afternoon Westpac responded to AUSTRAC’s statement of claim.
Firstly, it reminded investors that it has previously disclosed that it had self-reported to AUSTRAC a failure to report a large number of international funds transfer instructions (IFTIs).
It also pointed out that it revealed, as recently as its full year results release, that AUSTRAC was investigating a number of other areas relating to Westpac’s processes, procedures and oversight.
Westpac advised that the civil proceedings relate to these issues and allege failings in relation to correspondent banking, risk assessments, customer due diligence, transaction monitoring, record keeping, and the passing on of certain data in funds transfer instructions.
Very serious and important issues.
Westpac CEO, Brian Hartzer, said: “We recognise these are very serious and important issues. We are committed to assisting AUSTRAC and law enforcement agencies to stop financial crime. These issues should never have occurred and should have been identified and rectified sooner. It is disappointing that we have not met our own standards as well as regulatory expectations and requirements.”
The chief executive stressed that Westpac has been heavily investing in a program of work to improve and bolster the management of financial crime risks.
Mr Hartzer explained: “We have implemented a range of additional steps in our processes including enhanced automatic detection systems and we continue to proactively engage with AUSTRAC to close any remaining gaps to meet their requirements as well as our own expectations.”
“In relation to IFTIs, we have closed the ACM product and reported all the relevant transactions to AUSTRAC. The majority of the payments for which the reports were not generated were recurring, low value payments made by foreign government pension funds to people living in Australia,” he added.
What are the penalties?
At this stage it is impossible to what the ramifications will be for Westpac. But it is worth noting that Commonwealth Bank of Australia (ASX: CBA) paid a $700 million fine in 2018 for anti-money laundering, terror financing law breaches.
So, it certainly has the potential to be a hefty fine and put pressure on its bottom line and dividends.
The post Why the Westpac share price is down 3% today appeared first on Motley Fool Australia.
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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019