The financial crimes watchdog has alleged that Westpac’s failure to appropriately monitor its customers meant they did not identify 12 people suspected of involvement in child exploitation.
According to AUSTRAC, at least one Westpac customer transferred money to a child sex trafficker.
“In October 2014 and November 2014 customer 1 transferred money to a person located in the Philippines who was later arrested in November 2015 for child trafficking and child exploitation involving live streaming of child sex shows and offering children for sex,” the regulator’s statement of claim reads.
“Had Westpac been appropriately monitoring for frequent low-value transactions consistent with child exploitation typologies in 2014, these transactions would have come to its attention.”
Customer 1 continued to make suspect transfers until 2019. AUSTRAC also flagged 11 other customers engaged in similar behaviour.
According to AUSTRAC’s concise statement to the Federal Court, one customer opened multiple Westpac accounts after serving a custodial sentence for child exploitation offences. While Westpac identified activity indicative of child exploitation on one account, they failed to promptly review the customer’s other accounts. The customer continued to send frequent low-value payments to the Philippines.
“Since at least 2013, Westpac was aware of the heightened child exploitation risks associated with frequent low-value payments to the Philippines and Southeast Asia, both from AUSTRAC guidance and its own risk assessments,” AUSTRAC wrote in their concise statement.
“In June 2016, senior management within Westpac was specifically briefed on these risks with respect to the LitePay channel.”
Westpac issued a mea culpa that did little to answer questions of how the bank let the questionable transactions – some of which totalled hundreds of thousands of dollars – continue.
“These issues should never have occurred and should have been identified and rectified sooner,” said CEO Brian Hartzer.
Hartzer says that the bank has now implemented enhanced automatic detection systems and is working “proactively” with AUSTRAC to meet their requirements.
“As part of this we are also taking very seriously AUSTRAC’s concerns around appropriate customer due diligence on transactions to the Philippines and Southeast Asia, including reviewing relevant processes,” Mr Hartzer said.
AUSTRAC is seeking civil penalties against Westpac for 23 million contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF).
The regulator alleges that Westpac allowed correspondent banks to access its banking environment and the Australian payments system without conducting appropriate due diligence on those banks.
Westpac also failed to report over 19.5 million international funds transfer instructions (IFTIs) to AUSTRAC over nearly five years for transfers both into and out of Australia. In 2018, Commonwealth Bank was hit with a $700 million fine by AUSTRAC for non-compliance with money laundering law.