Westpac risk culture ‘immature and reactive’

Lachlan Maddock
— 1 minute read

An independent review has found Westpac’s problems were “sins of omission, not commission” – but the troubled bank is far from exonerated.

The review of the allegations contained within AUSTRAC’s shocking statement of claim found that systemic failures occurred within Westpac due to “deficient financial crime processes, compounded by poor individual judgements”. 

“While the compliance failures were serious, the problems were faults of omission,” said CEO Peter King. “There was no evidence of intentional wrongdoing.”


However, AUSTRAC’s statement of claim alleged indifference rather than “intentional wrongdoing” or a conspiracy to conceal that wrongdoing. It’s a charge that has already seen the departure of a number of key executives, including former CEO Brian Hartzer, and one that AUSTRAC is likely to take to court if the parties are unable to reach a settlement. 

Failure to report international funds transfer instructions (IFTIs) occurred due to a mix of “technology and human error” dating back to 2009. 

“The failings – such as [non-reported] IFTIs or inadequate due diligence on correspondent banks and particular customers – occurred deep in the organisation and it is not reasonable to expect that a board should find these out,” the review reads. “The board relies on information flows from management and it was the content of those flows that was poor.

“Information was (unintentionally) misleading and sometimes omitted.”

Thirty-eight individuals involved in the incident have had around $20 million of bonuses withheld as a result of the report, while a significant number of executives have now departed from the bank, including Lyn Cobley, the head of Westpac’s institutional bank business. 

Since the incident, Westpac has also begun a program of cultural change that has seen Les Vance appointed to the new role of group executive for financial crime compliance and conduct and the establishment of a legal, regulatory and compliance subcommittee, along with a number of other organisational changes. 

“We will have no tolerance for controllable negative events,” said Westpac chairman John McFarlane. “Our transformation program has begun and will bring deep cultural change.”

Westpac has already admitted to breaching AML/CTF legislation 23 million times, but claims that it did perform some level of due diligence on correspondent banks and the 12 customers whose financial activity was consistent with child abuse typologies. 

Westpac has provisioned $900 million for a potential penalty.


Westpac risk culture ‘immature and reactive’
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