September 24, 2020
By Byron Kaye
SYDNEY (Reuters) – Australia’s Westpac Banking Corp <WBC.AX> agreed to pay a record A$1.3 billion ($920 million) fine to settle a lawsuit accusing it of enabling millions of payments to people exploiting children.
Ten months after financial crime agency AUSTRAC dropped the bombshell lawsuit, the second-largest Australian lender said the parties agreed on a payout for allowing illicit payments to continue for years, plus 76,000 additional breaches discovered once legal proceedings had started.
“We are committed to fixing the issues to ensure that these mistakes do not happen again,” Westpac chief executive Peter King said in a statement.
AUSTRAC said the settlement showed it would do whatever was necessary to stop criminals from exploiting the Australian financial system.
“Our role is to harden the financial system against serious crime and terrorism financing, and this penalty reflects the serious and systemic nature of Westpac’s non-compliance,” AUSTRAC chief executive Nicole Rose said in a statement.
The payout exceeds the A$900 million Westpac said it was setting aside for the lawsuit in April, and dwarfs a A$700 million fine against larger rival Commonwealth Bank of Australia <CBA.AX> when it admitted to allowing thousands of payments between money launderers in 2018.
The settlement comes at a fraught time for Australian banks in general, with a powerful inquiry last year accusing the industry of rampant fee-gouging and predatory sales tactics to inflate bonuses.
Banks now must tread the sensitive path of getting thousands of borrowers to pay their mortgages again after offering loan holidays tied to government-ordered shutdowns to fight the pandemic.
“There’s still some ASIC issues, some class actions, but this is the bulk of it so I think that provides a lot more certainty for them going forward,” said Bell Potter analyst TS Lim, referring to action brought by the Australian Securities and Investments Commission in light of the AUSTRAC lawsuit.
“Plus it’s hard to run a bank during COVID, so that’s one less distraction for Peter King,” he said.
(Reporting by Byron Kaye in Sydney and Shriya Ramakrishnan in Bengaluru; Editing by Aditya Soni, Sriraj Kalluvila and Gerry Doyle)