Australia’s Westpac Group (WBC.AX,WBK) agreed to pay A$1.3 billion to settle the civil proceedings over money laundering and child exploitation allegations brought by financial crimes regulator AUSTRAC.
The Federal Court of Australia will now consider the proposed settlement and penalty. If the court approves it, the penalty will be the largest ever civil penalty in Australian corporate history.
The penalty is A$400 million more than A$900 million Westpac had set aside for a potential penalty. It is almost double the A$700 million that Commonwealth Bank of Australia paid to settle its money-laundering breaches in 2018.
Westpac said it will increase provision in its accounts for the year ending 30 September 2020 by a further A$404 million to account for the higher estimated penalty and for additional costs, including AUSTRAC’s legal costs of A$3.75 million.
Westpac Group Chief Executive Officer, Peter King, said, “I would like to apologise sincerely for the Bank’s failings. We are committed to fixing the issues to ensure that these mistakes do not happen again.”
In reaching the agreement, Westpac admitted that it failed to properly report over 19.5 million International Funds Transfer Instructions amounting to over A$11 billion to AUSTRAC. The bank has also admitted to about 76,000 additional contraventions which expand the original statement of claim.
Westpac also admitted that it failed to carry out appropriate customer due diligence in relation to suspicious transactions associated with possible child exploitation.
In November last year, AUSTRAC launched federal court action accusing Westpac of breaching the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 on over 23 million occasions, exposing Australia’s financial system to criminal exploitation.
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