AUSTRAC, Australia’s anti money-laundering and terrorism financing regulator, has today applied to the Federal Court of Australia for civil penalty orders against Westpac Banking Corporation (Westpac).
The civil penalty orders relate to systemic non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). AUSTRAC alleges Westpac contravened the AML/CTF Act on over 23 million occasions.
AUSTRAC Chief Executive Officer, Nicole Rose, says that AUSTRAC’s decision to commence civil penalty proceedings was made following a detailed investigation into Westpac’s non-compliance.
It is alleged that Westpac’s oversight of the banking and designated services provided through its correspondent banking relationships was deficient. Westpac’s oversight of its AML/CTF Program, intended to identify, mitigate and manage the money laundering and terrorism financing risks of its designated services, was also deficient. These failures in oversight resulted in serious and systemic non-compliance with the AML/CTF Act.
Westpac failed to:
- appropriately assess and monitor the ongoing money laundering and terrorism financing risks associated with the movement of money into and out of Australia through correspondent banking relationships. Westpac has allowed correspondent banks to access its banking environment and the Australian Payments System without conducting appropriate due diligence on those correspondent banks and without appropriate risk assessments and controls on the products and channels offered as part of that relationship.
- report over 19.5 million International Funds Transfer Instructions (IFTIs) to AUSTRAC over nearly five years for transfers both into and out of Australia. The late incoming IFTIs received from four correspondent banks alone represent over 72% of all incoming IFTIs received by Westpac in the period November 2013 to September 2018 and amounts to over $11 billion dollars. IFTIs are a key source of information from the financial services sector that provides vital information into AUSTRAC’s financial intelligence to protect Australia’s financial system and the community from harm.
- pass on information about the source of funds to other banks in the transfer chain. This conduct deprived the other banks of information they needed to understand the source of funds to manage their own AML/CTF risks.
- keep records relating to the origin of some of these international funds transfers.
- carry out appropriate customer due diligence on transactions to the Philippines and South East Asia that have known financial indicators relating to potential child exploitation risks. Westpac failed to introduce appropriate detection scenarios to detect known child exploitation typologies, consistent with AUSTRAC guidance and their own risk assessments.
“These AML/CTF laws are in place to protect Australia’s financial system, businesses and the community from criminal exploitation. Serious and systemic non-compliance leaves our financial system open to being exploited by criminals,” Ms Rose said.
“The failure to pass on information about IFTIs to AUSTRAC undermines the integrity of Australia’s financial system and hinders AUSTRAC’s ability to track down the origins of financial transactions, when required to support police investigations.”
AUSTRAC’s approach to regulation is based on building resilience in the financial system and on educating the financial services sector to ensure they understand, and are able to comply with, their compliance and reporting obligations. Businesses are the first line of defence in protecting the financial system from abuse.
“We have been, and will continue to work with Westpac during these proceedings to strengthen their AML/CTF processes and frameworks,” Ms Rose said.
“Westpac disclosed issues with its IFTI reporting, has cooperated with AUSTRAC’s investigation and has commenced the process of uplifting its AML/CTF controls.”
Westpac is a member of the Fintel Alliance. The Fintel Alliance is a private-public partnership established by AUSTRAC to tackle serious financial crime, including money laundering and terrorism financing.
- Concise statement (PDF, 1.51MB)
- Statement of claim (PDF, 5.33MB)
- Originating application (PDF, 905KB)
AUSTRAC’s enforcement powers
AUSTRAC has a range of enforcement powers available, which include:
- issuing infringement notices
- issuing remedial directions, which require a reporting entity to take specified action to ensure compliance
- accepting enforceable undertakings detailing the specific actions a reporting entity will commence or cease in order to comply with the AML/CTF Act
- seeking injunctions and/or civil penalty orders in the Federal Court