Australia’s Second Biggest Bank Westpac Hit With Money Laundering Charges, Including Enabling Payments By Child Exploiters

The Australian Transaction Reports and Analysis Centre, Australia’s money laundering watchdog, has accused the country’s second largest bank Westpac Banking Corp. of money laundering, including enabling transactions to and from convicted child sex offenders in the Philippines and Southeast Asia.

On the whole, the center alleged Westpac committed 23 million breaches of anti-money laundering rules between 2013 and 2018, involving payments of $11 billion ($7.5 billion U.S.).

The regulator is seeking to impose fines of up to $21 million ($14 million U.S.) for each transaction Westpac failed to monitor or report – thus potentially raising the specter of devastating fines.

In a court filing, the center said the breaches violated the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.

“These contraventions are the result of systemic failures in its control environment, indifference by senior management and inadequate oversight by the board,” the Center said.

The center noted in one case Westpac detected suspicious activity in an account but still allowed this customer “to send frequent low value payments to the Philippines through channels that were not being monitored appropriately.”

Between November 2013 and July 2019, the customer had 625 transactions worth about $136,000 ($92,512 U.S.) "in repeated patterns consistent with child exploitation typologies.”

In 2014, this same customer twice transferred money to an individual in the Philippines who was subsequently arrested in 2015 for streaming child sex shows on the internet.

Since at least 2013, the center alleged, Westpac was aware of the “heightened child exploitation risks” associated with these kinds of transactions.

Westpac, the regulator added, “still has not implemented appropriate automated detection scenarios to monitor for the known child exploitation risks through other channels.”

As a result, Westpac “failed to detect activity on its customers' accounts that is indicative of child exploitation,” the watchdog added.

Some of the transactions under Westpac’s purview also violated anti-terrorism protocols that banks in Australia must follow.

Many of these transactions were facilitated through offshore banks with whom Westpac maintained relationships – some of these banks had relationships with "high risk or sanctioned countries” like Iraq, Lebanon, Ukraine, Zimbabwe and Democratic Republic of Congo.

"The risk posed to Westpac was that these high risk or sanctioned countries may have been able to access the Australian payment system," the center stated.

"We recognize these are very serious and important issues,” Westpac CEO Brian Hartzer said. “We are committed to assisting [the center] and law enforcement agencies to stop financial crime.”

Hartzer added: "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.”

Prime Minister Scott Morrison said he was “absolutely appalled” by the news.

Last year, Commonwealth Bank of Australia agreed to pay a record $700 million ($477 million U.S.) after admitting to similar breaches. It was the largest civil settlement in the nation’s history.

“Being accused of deficient oversight of correspondent banking relationships and oversight over money laundering and terrorism financing risks is a bad look,” said Nathan Zaia, an analyst at Morningstar.