AUSTRAC has taken its pound of flesh, but Westpac’s record-breaking penalty might just be the start.
Just a few weeks ago, Westpac CEO Peter King was confident that the bank had put aside enough money to cover a potential fine for the AUSTRAC matter, telling the standing committee on economics he was ready to settle with the regulator while acknowledging the final penalty could be “materially higher” than the $900 million provision.
But experts and commentators alike had long believed the regulator would aim as high as $1.5 billion – the biggest fine in Australian corporate history – and on Thursday, they were proved more or less correct.
“I would like to apologise sincerely for the bank’s failings,” Mr King said as he announced Westpac would pay a $1.3 billion penalty, along with AUSTRAC’s court costs.
“We are committed to fixing the issues to ensure that these mistakes do not happen again. This has been my number one priority. We have also closed down relevant products and reported all relevant historical transaction.”
It’s a humiliating final chapter in the AUSTRAC saga – a saga that has seen the bank shed executives and become a post-royal commission byword for cultural failings in the Australian financial services landscape. It’s clear that Mr King was relying on Westpac’s cultural about-face to stay the executioner’s axe.
But in the end, all the talk of improving risk culture and overhauling the bank’s financial crime capabilities did little to impress the regulator. Chairman John McFarlane’s ill-advised appearance in the pages of the AFR – in which the high-flyer insisted that Westpac knew better than anybody what the problem was and how to deal with it – likely didn’t help matters, earning a sharp rebuke from Attorney-General Christian Porter.
The fact that AUSTRAC didn’t aim higher might simply be out of recognition of the banking sector’s COVID troubles. With Westpac recently reporting another 276 suspicious activity reports related to customers potentially involved in child exploitation, it could certainly have tried for the $1.5 billion. But Westpac is still facing an APRA/ASIC investigation and will have a hard time putting the new $404 million provision to its shareholders after already choosing to defer its first-half dividend.
Mr King has quite the road ahead of him – and it’s clear that the 200 financial crime experts the bank has recently recruited will only be the start.