Australia’s second-biggest bank, Westpac, is poised to overtake the biggest, the Commonwealth Bank. Not in terms of assets, earnings or market capitalisation, but in having to pay the heftiest fine in Australian corporate history.
Westpac is accused of breaching laws aimed at hindering criminal money laundering and the financing of terrorism. With some of those breaches involving supicious transactions in South-East Asia, it is alleged Westpac has potentially facilitated the most heinous of crimes – the commerce of child sex abuse.
Each breach carries a penalty of up to A$63,000. Westpac is accused of 23 million breaches.
That means it could potentially be fined more than A$1 trillion. The actual fine is likely to be bargained down, as Commonwealth Bank did in agreeing to pay A$700 million in 2018 for its own breaches of anti-money-laundering provisions.
Even so, Westpac is still likely to be up for more than A$1 billion.
So what exactly is it accused of doing wrong, and what should it have done? Here’s a quick guide to how Australia’s anti-money-laundering laws work.
Know your customerAUSTRAC poster
The Australian Transaction Reports and Analysis Centre (AUSTRAC) requires organisations that handle big amounts of money, such as banks and casinos, to monitor transactions and report suspicious ones.
AUSTRAC assembles intelligence and passes it onto partner agencies such as the Australian Federal Police.
The requirements spring from Australian legislation and obligations under international agreements.
One of the better-known requirements is an obligation to report any cash transaction exceeding A$10,000.
Less well-known, but perhaps more onerous, is the obligation to “know your customer”.
“Know your customer” means banks and other financial services organisations must collect information about their customers and assess their legitimate business behaviours before entering into an agreement, such as the provision of international money transfer services.
Banks must then monitor ongoing customer transactions. If, for example, a business makes a large number of small cash transactions remitted to one overseas address then the bank needs to understand the purpose of the transactions and the legitimacy of the receiver.
What it’s alleged Westpac did
- ^ Westpac's scandal highlights a system failing to deter corporate wrongdoing (theconversation.com)
- ^ A$700 million (www.abc.net.au)
- ^ AUSTRAC poster (www.austrac.gov.au)
- ^ AUSTRAC (www.austrac.gov.au)
- ^ Know your customer (www.austrac.gov.au)
- ^ VIDEO: Michelle Grattan on the Westpac scandal - and changes to robo-debt (theconversation.com)
- ^ Federal Court notice of filing (www.austrac.gov.au)
- ^ failed (www.austrac.gov.au)
- ^ Westpac's weekend response. (cdn.theconversation.com)
- ^ response plan (cdn.theconversation.com)
- ^ Extract from Westpac's weekend response. (cdn.theconversation.com)
- ^ Commonwealth Bank (www.austrac.gov.au)
- ^ National Australia Bank (www.abc.net.au)
Authors: Ian Fargher, Lecturer in Accounting, University of Wollongong