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Westpac pummeled by AUSTRAC, bushfires

Lachlan Maddock
— 1 minute read

Westpac will have to tighten the purse strings as the looming AUSTRAC penalty and natural disaster costs force the bank to downgrade earnings growth.

In a trading update, Westpac said it would need to “reconsider its current cost growth expectations” as it prepares to pay out a possible fine of more than $1 billion to anti-money laundering regulator AUSTRAC for its 23 million breaches of AML/CTF legislation. 

The bank also noted the other investigations being carried out by APRA and ASIC, saying “the outcomes of these investigations are unknown”.

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“Westpac remains committed to materially lifting its approach to risk management,” Westpac wrote in the trading update. 

“At the same time, the number of regulatory investigations and reviews into the Group’s business has risen. The Group expects to incur additional expenses in financial year 2020 and will need to reconsider its current cost growth expectations.”

The bank also provided an update on its efforts to comply with AML/CTF legislation, including a lookback screen of customer transactions to further identify and report suspicious activity to AUSTRAC. The bank is still working towards a statement of agreed facts with AUSTRAC, and a second case management hearing is scheduled for 2 March 2020. Despite that, the bank is still unable to reliably estimate a penalty and no provision has been raised.

“Unprecedented” bushfires and the storms that have lashed Australia’s east coast since early January have also weighed heavily on the bank’s outlook, with pre-tax insurance claims of $140 million and bushfire relief packages and grants of approximately $26 million likely to bite into its bottom line. 

“In addition to the above, the bushfires, storms and coronavirus are expected to have an economic impact which may ultimately affect banking activity and growth,” Westpac wrote. 

“Westpac Economics recently updated their Australian GDP forecast calendar year 2020 to 1.9 per cent (down from 2.4 per cent forecast at November 2019). The tourism and education sectors are expected to be particularly impacted.”

 

Westpac pummeled by AUSTRAC, bushfires
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