Westpac Banking Corporation (WBC)
(WBC1) 24 September 2020
WBC and AUSTRAC agreed to a $1.3 billion dollar penalty over WBC’s breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).
WBC and AUSTRAC mutually agreed that the proposed penalty reflected the seriousness and magnitude of compliance failings by Westpac.
The Federal Court of Australia considered and agreed with the proposed settlement and penalty. The penalty order made represented the largest ever civil penalty in Australian history.
WBC admitted to contravening the AML/CTF Act on over 23 million occasions, exposing Australia’s financial system to criminal exploitation.
In summary, WBC admitted that it failed to:
- Properly report over 19.5 million International Funds Transfer Instructions (IFTIs) amounting to over $11 billion dollars to AUSTRAC.
- Pass on information relating to the origin of some of these international funds transfers and to pass on information about the source of funds to other banks in the transfer chain, which these banks needed to manage their own ML/TF risks.
- Keep records relating to the origin of some of these international funds transfers.
- Appropriately assess and monitor the risks associated with the movement of money into and out of Australia through its correspondent banking relationships, including with known higher risk jurisdictions.
- Carry out appropriate customer due diligence in relation to suspicious transactions associated with possible child exploitation.
Penalties:
$1.3 Billion
Attachments:
(WBC1) 20200924 [Austrac Media Release – Westpac ($1.3B Penalty)]
(WBC1) 20200924 [Westpac Media Release – Austrac ($1.3B Penalty)]
(WBC1) Austrac v Westpac [2020] FCA 1538 ($1.3B Penalty)
(WBC2) 22 April 2022
The Federal Court ordered WBC to pay penalties in the amount of $113 million for widespread compliance failures across multiple businesses, including WBC’s banking, superannuation, wealth management and insurance brands.
The breaches found by the Court in these six cases demonstrated a profound and systematic failure by WBC over many years and across many areas of its business to implement appropriate systems and processes to ensure its customers were treated fairly.
Across all six matters, Justice Beach noted that systems and compliance failures were a common feature and the misconduct by WBC was considered serious. Regarding the charging of deceased customers, Justice Beach commented that Westpac and the related entities ‘utterly failed to address the issues systematically’.
WBC admitted to the allegations in each of the proceedings.
The six matters against Westpac concern:
- Fees for no service – deceased customers.
Over a 10-year period, Westpac and related entities within the Westpac group, charged over $10.9 million in advice fees to over 11,800 deceased customers for financial advice services that were not provided due to their death.
- General insurance.
Westpac distributed duplicate insurance policies to over 7,000 customers for the same property at the same time, including 3,899 customers since 30 November 2015, causing customers to pay for two (or more) insurance policies where they had no need for the additional policies. Westpac also issued insurance policies to 329 customers who had not consented to entering into an insurance policy.
- Inadequate fee disclosure.
Westpac, Securitor and Magnitude (advice businesses) charged ongoing contribution fees for financial advice to retail customers without disclosing, or properly disclosing those fees. It is estimated that over eight years, at least 25,000 customer accounts were charged at least $10.6 million in fees that were not disclosed, or properly disclosed.
- Deregistered company accounts.
Westpac allowed approximately 21,000 deregistered company accounts, holding approximately $120 million in funds, to remain open and continued to charge fees on those accounts. Westpac allowed funds to be withdrawn from these accounts that should have been remitted to ASIC or the Commonwealth. Justice Beach found that Westpac knew its systems were inadequate, did not fix those systems in a timely fashion and benefitted from its own conduct.
- Debt on sale.
Westpac sold consumer credit card and flexi-loan debt to debt purchasers with incorrect interest rates. These interest rates were higher than Westpac was contractually allowed to charge on at least part of the debts, resulting in more than 16,000 customers, who were likely to be in financial distress, being overcharged interest.
- Insurance in super.
Westpac subsidiary, BT Funds Management charged members insurance premiums that included commission payments, despite commissions having been banned under the Future of Financial Advice reforms. Some members also paid commissions to financial advisers via their premiums even though they had elected to have the financial adviser component removed from their account. Over 9,900 BT Funds members were affected.
This conduct was the subject of the Financial Services Royal Commission (Final Report 1 February 2019).
Penalties:
WBC remediated $80 million to impacted customers.
Fees for no service to deceased customers $40 million.
General Insurance $15 million.
Inadequate fee disclosure $6 million.
Deregistered company accounts $20 million.
Debt on sale $12 million.
Insurance in super $20 million.
Attachments:
(WBC2) 20220408 [ASIC v Westpac Orders VID 705-2021 Super Ins $20 Penalty]
(WBC2) 20220420 [ASIC v Westpac Orders VID 704-2021 Deregistered Companies $20m Penalty]
(WBC2) 20220422 [ASIC Media Release4 – Westpac (Multiple Offences $113m Penalty)]
(WBC2) 20220422 [ASIC v Westpac Orders NSD1239-2021 Debt Onsale $12m Penalty]
(WBC2) 20220422 [ASIC v Westpac Orders NSD1240-2021 Fee Disclosure Failure $6m Penalty]
(WBC2) 20220422 [ASIC v Westpac Orders NSD1241-2021 General Ins $15m Penalty]
(WBC2) ASIC v Westpac (Omnibus) [2022] FCA 515 ($113m Penalties)
